A Conversation with Matt Simmons

While at the ASPO-USA Denver World Oil Conference, I managed to buttonhole Matt Simmons in a corner for a while. Here's what we talked about.

Matt Simmons receives his M. King Hubbert Award from ASPO-USA cofounder Steve Andrews.

SS: Tell me a little bit about where you grew up.

MS: I grew up in Davis County, Utah which is half way between Salt Lake City and Ogden. My dad had a legendary career coming from a really poor background to become one of the most successful commercial bankers in the Rockies.

SS: What was his name?

MS: Roy Simmons. He's almost 90. When I was in college I was sure I was going to end up a commercial banker.

SS: Where'd you go to college?

MS: University of Utah, where everyone in our family went. One day I had a fraternity brother who came in and said, "I'm so excited today", and I said, "Why?" He said, "I just got into Harvard Business School," and I said, "What's that?" I didn't have any idea. I wasn't thinking about grad school but luckily got into Harvard Business School.

Almost all my classmates were older than me; they were just shutting the door on people who were coming in right out of college. I couldn't believe that all these older friends didn't know what they were going to do! I still thought I was going to be a commercial banker in Utah. But then I had this professor; I reluctantly signed up for a really tough 2nd-year course because my finance professor told me it was the best finance course in the school, even though it was called "Advanced Production Problems", and I hated production.

I loved it, and then, before grades came out, the Professor (who the book is dedicated to, C. Wickham Skinner) his secretary came and said "Professor Skinner wants to see you." So I went over, very timidly, to see Professor Skinner and he asked if I would be interested in staying on and working with him as a research assistant -- a case writer. I said, "Do what?" I didn't know the job existed. He suggested before I do that I really ought to enroll in the doctoral program because I could do both at the same time - and I said, "What?!"

After a year of working for him, he took me to lunch and he told me he'd traded me, because he said it would be fabulous if I stayed on and got my doctoral degree and taught. But I needed a mentor in finance so he'd traded me to Pearson Hunt, who was the senior finance professor. My heart sunk because one professor was really dynamic and the other wasn't. So I wanted to stay but it wasn't on the cards.

SS: He didn't ask you, he just told you?

MS: Well, I mean, first of all he said, "If you'd like to", but he'd already arranged it, and he was doing it for me. So, the first year I wrote fourteen cases, the second year I wrote 3 cases - I just had a ton of extra time, so ended up being in the deal business, while I was with Pearson Hunt. It was the late `60s stock market era, and I thought I was the smartest stock market guy in the world, so I started managing some money for some professors. One of the few cases I did for Pearson Hunt, it was on American Cement of all things. It came from combining with a trip to see my parents who were going to Palm Springs for a banking Mergers and Acquisitions seminar. Dad said, "There's an interesting young guy in our class, that keeps asking all the best questions, he's a deep sea diver." So I hung around the coffee break the next day and introduced myself. He was Laddie Handelman, he was the founder of a company called California Divers.

So I said, "Are you a treasure diver?", and he almost hit me, because he hated them. "No," he said, "we actually dive to assist developing offshore oil and gas." He said they were probably going to sell the company to one of the offshore drilling contractors... I said to myself, growing fast, interesting, "Why don't you raise some venture capital?" and he said, "What's that?" That was my introduction to the energy business.

Laddie was the founder of two New York Stock Exchange subsea services companies. Oceaneering (which he changed the name to). Then once the company got up to $85-100 million a year business, I was one of the directors, thought he was doing a bad job so I helped kick him out of the company. I knew that he would kill me if the company didn't make it. So I thought I'd lost a really close friend and also, a major client of our firm.

SS: So you had a firm by this point?

MS: Yeah, I had a firm by this point. Anyway, then he founded a new company, took the old name back, Caldive, and now on the New York Stock Exchange there's Oceaneering and there's Caldive.

When my two years were up at Harvard, that was sort of a fish-or-cut-bait time. I needed then to either get serious and start my dissertation or move on to something else. This research assistant thing wasn't a perpetual job. I wasn't interested in finishing my doctorate degree and in the meantime I couldn't do anything else because I was so busy doing all these deals. I raised money for this diving company...

SS: Because doing deals is fun. People who like it -- it's a drug almost.

MS: Oh yeah, I was having a lot of fun. I was raising this money for Oceaneering - $250,000 for 40% of the company. What they were doing at the time, which I didn't actually put into perspective for 25 years, was perfecting the mixed gas diving tables so that man could safely go beyond 200 ft. Had that not happened, we wouldn't have had a deep water industry. So I was actually working with the Thomas Edison of deep water. All the robotic stuff started around the same period of time.

I took a tiny office in downtown Boston, sort of middle of June. June 30th, the Dow Jones peaked at 1000 and luckily no-one told me that it would be 1982 before the Dow went back to 1000. By the next year the over-the-counter market had collapsed and all these stocks that I'd done so well in had gone down by 99%. My nest egg didn't look quite like that, so I was lucky I was putting some deals together. I got more and more involved in working with these companies, and I got fascinated with companies that weren't oil companies but oil service companies. No one in Houston seemed to understand this was a real business. When the Arab embargo of 1973 happened, within two weeks I realized it was a big deal; we've had 30 years of cheap oil and now we're going to have high oil prices, and that will open the door to a lot of projects.

SS: Did you have any recognition of the U.S. peak in production?

MS: Oh, hell no, I didn't know anything about the oil and gas business. But I thought no-one knows anything about the oil service industry, I might know more about the oil service industry, because no-one else knows about it. That's my point.

Every time I'd get back to Boston I'd have to do things in other industries, paper industry, some medical electronics and some land development; this stuff was boring as can be. But the North Sea was opening up and I thought I could set up a firm. A merchant bank in London had been wanting me to work for them and I thought I could get them to become a shareholder, get a couple of guys to join me. My younger brother would be perfect because he'd just graduated from Harvard. So I did my Dad two bad turns. I stayed away from the job, and I kept my brother away from the job. May 1, 1974, we opened our doors to be a dedicated investment bank to the oil service industry. Because we weren't trying to be energy experts, or oil and gas experts, but trying to be oil services experts, we subscribed to all of the best analysis of what was going on in the oil and gas industry. So we saw all these projections about how oil was going to go to $100 or more, and then the industry collapsed.

I thought we were going out of business. It took me about a year to understand all of the people we were subscribing to were idiots. I started looking into the primary data, supply and demand. I thought, God, it was so obvious that we were going to roll over. That's when I became a student of energy statistics. I was never again going to leave my career in the hands of the experts to say what the big picture is, and then we'll take that big picture and adapt it to oil services. I spoke all over in the 1980s about how the depression in the oil industry might go on for decades. If you didn't basically get the costs less than the revenues, then you were going to go out of business. So we did a massive amount of consolidation, jamming companies together, bankruptcy work and so forth.

By the end of the `80s I had convinced myself that the era was coming to an end. The capacity excess was very small. All these awful things were over. You know the Viet Nam general who said in order to save the village we had to destroy it? To save the oil services, we had to destroy it. Some of the projects we worked on, the Nirvana event was when we did a final analysis that said if these three companies come together they can fire 4,000 people and 1,000 people will have sustainable jobs. I learned how to go to industry forums and tell people they all had AIDS. Very unpleasant news that nobody wanted to hear, but people started applauding because I was speaking reality. When people know the truth, even if it's brutal, it's better than being in denial and then going out of business.

When I turned on a dime, and I started talking about growing again, people thought I had lost my marbles. By then I was really intently starting to look at, with low rig count, we're going to have collapsed production, the United States is going to end up in a decade, decade and a half, with half the production we have today without drilling for it. I wasn't involved with things like Hubbert's Peak, I just thought if you don't drill wells, you don't grow production. The excess was drained away. The only place you couldn't measure the excess was the Middle East. Even if they have excess capacity, they don't have the logistics to get there. I started talking about the fact that the gas bubble had disappeared, the oil bubble had disappeared, the rig bubble had disappeared, and unless we started expanding we were going to get into problems, because the low price were stimulating demand much faster than anyone thought - when everyone thought demand wasn't growing, it was actually growing. The big collapse only lasted four years.

Ten years ago I started doing analysis on depletion. All these oil field technologies that we helped save were being hyped as doing things they were not doing, but what they were doing was creating decline rates that we'd never been able to do before. Because you couldn't pull hydrocarbons out as fast before. In the last five years I have become one of the most famous speakers on depletion. It was in almost every talk I gave.

SS: Would you agree that these technologies do increase recovery rate?

MS: No.

SS: Not at all?

MS: Well, once in a great while.

SS: My understanding is that industry recovery rates have gone up from where they were twenty, thirty, years ago...

MS: There are always two or three exceptions: the Troll field in the North Sea, where they discovered, before they started producing, that underneath was a three foot layer of additional oil-bearing sands, they could get them both at the same time. That was one of the few cases. Sure, they could recover another billion and a half barrels of oil, but it doesn't have anything to do with running into decline, it's just managing the tail.

SS: But it has increased the recovery rate somewhat?

MS: No, not much. By 1997, 1998 I was basically having concern that we were heading for a bad landing and then came the oil price collapse, again.

SS: With the Asian flu?

MS: With that, and OPEC's overproduction, we had the biggest oil glut we've ever had - 3.5 million barrels a day. The only problem is that we couldn't find it. I had been a very harsh critic of the IEA's data for the previous 4 years because it was always wrong data, always -- by the time you got good data with the revisions it had all changed. When they started talking about the missing barrels, if you couldn't find the missing barrels then we didn't have a glut. But if the barrels were missing, you could still have a glut. For a year and a half, with the biggest oil collapse in fifty years, there were missing barrels, missing barrels, missing barrels, and at the apex they were looking for 700 million barrels of oil they couldn't find. And I was thinking, this is just awful, we're going to destroy the oil industry with bad data. We can't be missing barrels, we either have demand higher than we think or supply is lower. If you have a glut it will manifest itself in inventory. What we're looking for now is about ten times more than the excess tankers and tank farms in the world, so it would have to be stored on the moon. Or it's actually stored in the reservoirs; it was never produced.

The bottom of the oil collapse, February of 1999, the industry had believed the price collapse was permanent. The Economist had this unbelievable cover story that they admitted was the biggest blooper in their history: "Drowning in Oil." There was a thesis that oil prices wouldn't stay at ten, they would go to five. They would stay there from half a decade to a decade because Saudi Arabia was about to flood the world with cheap oil. They had this hundred-billion dollar war chest and I thought, "That's the dumbest thing I've ever heard." Problem is, everyone believes this. I talked to CEO's of all the major oil companies, talked to Dan Yergin, and I said this is stupid - Saudi Arabia is insolvent, there's not going to be any hundred billion dollars. What was funny was the cover story came out on Tuesday and on Friday the petroleum ministers of Venezuela, Mexico, and Saudi Arabia announced that they'd agreed that collectively they were going to take two million barrels a day off the market to get this scourge off their backs and oil prices then went from $10 to $37 18 months later. They cut into a balanced market.

So by this time I'm really intensely going after the data issues. Then I was asked by the Petroleum Council if I would be one of the taskforce chairmen of this big study being done on natural gas. In that study, I realized that - I was the Demand Taskforce chair - that I didn't know anything about electricity. I thought that power generation was power, turbines or something, pistons. No, it was just electricity. I did a quick study for about three months and ended up learning more about electricity than almost anyone else. It's only when you can finally connect all the energy dots that you start understanding the whole thing. You go back and forth between the electricity markets, the natural gas markets, the oil markets, that you start understanding the whole thing - anchored with a very good knowledge of the mechanics through the oil service industry.

I became more and more outspoken about how this isn't going to end well. I did this world giant oil field study, what the top ten, twenty, oil fields are, no one seemed to know. And that was an eye-opener, that in the Middle East there were only a handful of fields that produced really well, and they were all really old. These people that say the Middle East can produce everything - why did they never produce any more? Because all these fields are old. Look at the Iranian fields. There are four or five fields that used to be a million barrels a day and are now way less.

Somewhere around there I got roped in with this peak oil group of people. I never tried to understand reserves. If you would basically go a decade adding 125% more than you produce then you'd be doubling your production. Maybe they are doubling their reserves, but the decline curve is so steep that it doesn't matter. I finally realized that no they aren't real reserves.

And I'm also working very hard, in 1990 the firm had made it through the worst industrial collapse in the only area were were in; we didn't have any diversification. I thought that was the only risk we'd face, if we can do that, we can survive forever. And by then we're the absolute oil-service specialists in the world, we're known around the world for that. So then I've got to develop a second generation management so the firm actually survives me. Doing that allowed me more time to do analysis, which I have always loved doing. I'm basically an educator at heart, or a teacher at heart, or an analyst at heart. I'd rather do that than work on deals. And for thirty-odd years, I was a really good deal person.

I finally get into this odd thing asked by this friend in Austin to be on this 9-person delegation to Saudi Arabia and I'm really excited about it until the trip gets postponed about eight times, and I'm getting so busy. It's 2003 and one of the VPs calls and says they want to pin down a date in late January or early February and I say I really can't do it. Was a great idea last spring and summer, but I've lost my window. I'm going to Paris to speak and two weeks later I'm going to China. He says, what if we plan our trip and get you back that Thursday in Paris. I said, "Ok, that's fine", thinking, "This will fall apart again." The week before we're supposed to go, my assistant keeps asking shouldn't we call? And I said, "No, let sleeping dogs lie." And seven days before we're supposed to leave she gets this call from Dallas saying they Federal Expressed seven passports, can we walk them all over to the Saudi Consulate? We're going next Thursday and our visas are approved.

SS: So you almost didn't go?

MS: My wife that weekend was so mad at me, that I had basically agreed to do this trip. She said, "We're about to go to war, you have five daughters." I was mad at myself because I was about to waste a week. So I said, "Who are we going to see?" Well, we don't know that, we're going to be told that when we arrive there. Why did I do this?

So we arrive there and Herbert Hunt says we all meet up in Paris and we take the Air France flight to Riyadh and I'm thinking we're going to hang around some government guest house, maybe have three appointments, and I'm so busy. We arrive and I'm told get ready for about two hours of getting through customs. But they said, "Would Mr. Hunt and his delegation please come to the front of the plane?" and we get to the front of the plane and there are two guys in robes and who say, "Gentlemen, welcome to Saudi Arabia, let's just go through the side door here." We have a VIP trip, it was just unbelievably interesting, six days. I'm taking copious notes and every time we get close to anything to do with oil I keep asking innocent questions. We finally tour the Abqaiq processing plant. I'd never seen a GOSP [Gas Oil Separating Plant] before. I ask, basically, what's going on. They say, when the oil comes in there will be all this water. and we have to strip the water out then take the water and recycle it. "Why is there water in it, is there a river?" No, that's our primary drive. I'm looking at these water pipes and thinking, that's an awful lot of water. I'm taking notes and thinking, if there's this much water...I know what water does. We've done all these projects in water handling. The next day we're having all these presentations and sitting there thinking something isn't right. On the plane going back to Paris, and Herbert Hunt is this really good oil guy, I say Herbert, look at all these dots. Could these fields be on the brink of finally running into decline? What would the world do? So I go home and said I'm going to wrestle this to the ground because now I know what to look for. I discovered this unbelievable treasure trove of technical papers at the Society for Petroleum Engineers, and by the time I got thirty-nine of them that I randomly downloaded, I realized this is a far more serious problem, and I'm going to write a really serious white paper this summer. I decided to go back and systematically go through more papers. By the end of the summer I had gone through about 150 papers and stacked them by their individual field and read them chronologically, and thought, I'm going to write a book and self publish, get this thing out to the public because this is a myth.

But it wasn't just the two-and-a-half years, it was actually thirty years and a great deal of intellectual curiosity and becoming a real skeptic of all these energy myths. Even in the early `70s when we'd go into these companies, our modus operandi was put a memorandum together so that you know more about the company than the owner of the company does. Because if you go into it half-baked, that's how deals fall apart.

SS: Because surprises come up in the middle?

MS: Yeah, so you'd say "You have ten drilling rigs, how many wells do you drill each?" And they'd say, "Oh, about 10", and I'd say, "No you don't, you drill about five, and here's the data." Amazing how many people just fake stuff. At any rate, that's the whole background.

SS: You have read the CERA report...

MS: Yeah, yeah, sure.

SS: What's your critique of it? Obviously you disagree radically.

MS: Well, if it is a detailed bottoms up field-by-field they only name about 30 fields, ten a year...

SS: This is true in the full report as well?

MS: Yeah, I read the full report - it's 51 pages

SS: They don't have an appendix with all the fields?

MS: No, not in the one they give to their private clients, that people pay for. They list 10 fields coming on in 2005, 10 coming on 2006, 10 in 2007...

SS: There's about 2 million barrels a day in each year...

MS: 2 million barrels a day, and they have names. The thing that's wrong with them is that they assume that they all happen. And they assume they all happen that year. And they assume that none of them decline. Their biggest one for 2005 unfortunately won't happen until next year. Thunderhorse. It's not their fault. [...] But the thing is, a lot of the fields don't have names.

SS: Let me get this clear, are you saying you don't think there's 16 million barrels a day of new capacity, or are you saying there may well be 16 million barrels a day, but you don't think they're taking into account the decline?

MS: I don't think they can possibly do 16 million barrels a day with this list of projects without naming them. I think they're notional projects.

SS: Chris Skrebowski is claiming 16 in new projects.

MS: I don't think so; he's got quite a different list. He really takes issue with the list.

SS: The totals are similar, for new capacity.

MS: We won't bring on that new capacity, we're out of drilling rigs. It's too bad people didn't realize we're running out of rigs and we won't resolve the rig problem until well after 2010. But to call it a field-by-field bottoms up and then just have a notional idea... if a field does not have a name today, it won't be done by the end of 2009. We just would not have time. The whole thing is typical of the analysis they did when they assured all of their clients that we had abundant robust natural gas, all these pessimists about natural gas are just flat wrong. And they did a bottom-up study then too. And they did the bottoms up story then, too. And they turned out, unfortunately, to be as wrong as me promising that there is a Santa Claus, and you finding that there wasn't.

And with that, Matt had to rush off to be on TV again.

My thanks to Tamsen Merrill for transcribing the tape.

Interesting interview, especially that last bit about new oil coming in the next few years. Simmons disagrees not only with CERA but also Skrebowski, as you mention, and Tom Petrie, who said at the conference last week that there's anywhere between 10 and 22 mbd coming by 2010.

I guess in a few years we'll know who's right. Maybe the lack of rigs is really going to keep everything down.

Excellent interview Stuart!
the last part about the rig shortage is especially interesting.
i've heard that with a lot of the oil development and production workers currently in the industry coming up for retirement in the next few years, skilled labour is also going to be a major constraint.
to me, project slippage will be a major factor in hastening the peak.
because depletion doesn't sleep. current fields keep declining, so it just means more ground to catch up.
There is a benefit to project slippage, though:  In the long run, the oil whose extraction is thus delayed will help mitigate the rate of world-decline in coming decades.  This is a silver-lining in the cloud of limited rig-counts, etc., that is not to be overlooked.  Is anyone attempting to quantify this silver-lining in any serious way?
The debate over new fields coming on stream once again reminds me of Texas.  From 1972 to 1982, the number of producing wells in Texas went up by 14%.  Over the same time period, oil production dropped by 30%--because production from the new, smaller fields could not make up for the declines from the older, larger fields like East Texas.
(Following is the review that I posted on Amazon, regarding Matt's book.)--Jeffrey Brown

In my opinion, Matt Simmons--and others like Jim Kunstler, Kenneth Deffeyes, etc.--are providing an important national service in attempting to warn us of what is coming.

Mr. Simmons' book is exhaustively researched and documented. I recommend that you read the entire book, but if you only read part of the book, read the chapter on Ghawar, the largest oil field in the world. Probably 99.99% of Americans have never heard of Ghawar, but as goes Ghawar so goes the world economy.

The Saudis are proudly boasting of their reserves and of their ability to ramp up their production. In Texas in 1972, Texas oilmen were similarly confident.

In 1972, Texas was producing an all time record high amount of oil. Since then? Texas oil production has fallen for 33 straight years. If Texas were the sole source of crude oil for the world, for every four gallons of gasoline that we bought in 1972, we would be bidding for one gallon today.

Once, Texas was as Saudi Arabia is today. Soon, Saudi Arabia will be as Texas is today--a permanently declining oil province.

Hopefully, just as Great Britain finally listened to Churchill and started preparing for war, Americans will start listening to Matt Simmons, et al, and start preparing for a vastly different way of life.

There's another review here in today's Globe and Mail.  
Does anyone know if there's any detail on the report available publicly anywhere? I can't find it on RSEG's website (www.rseg.com), or anywhere on the net. It seems like it's important.
There is nothing on the web about this. What's going on here?
I emailed the guy and asked for an interview.
Hmmm - my email bounced because his Blackberry quota has overflowed. Guess a lot of people want to talk to him right now. I'll try again later.
OK, try this

Peak Oil Promoter Flayed for Saudi Reserves Scare Mongering

Jim Jarrell of Ross Smith is getting his information from Dr. Nansen Saleri, Manager of Reservoir Management for Saudi Aramco. And you can find that here.
On the RSEG site, there is a pdf, which is a scan of a National Post article about the Jarrell report.
someone at PO.com appears to either have non-web-based access to this article, used OCR on the scan or they have manually typed the article into their post.
it's worth a read.


Great review.
Pete and Repeat went out in a boat.
Pete fell in.
Who was left?

Pete and Repeat went out in a boat.
Pete fell in.
Who was left?

Do you know why Elephants paint their toenails red?
So that they can hide in cherry trees!
Have you ever seen an Elephant in a cherry tree?
... no ...
See it works!

I've fallen and I can't get up!

Where's the beef?

A little less talk and a lot more action.

left, right , moderate, liberal, conservative,
socalist, communist, libertarian, independant,zealot,
harlot, elite, grassroots, radicals ...

"You're confuseing me... just let me put the ball
 in the hole."  -Happy Gilmore-

TIME- The hell in which we all burn.

matthew 6:34

think small, think fast, peace

wigz: You're kind of getting way irrelevant here.
Stuart hey guy,
Regarding Matt Simmons and his relationship with
VP Cheney/Haliburton and the Bush Administration in
general; does it not seem odd-coincidental for MS to
be taking the charge and exposing Saudia Arabias
dirty laundry?

Does not the light shed imply - passing the buck -
(blame game) at least in the sense the White House
can claim to have been a victim of false energy hope
(available information)?

Thanks to TITD The spinsters can plead the case that we
(U.S government) were victims dupped by a
fly by night scam of non existing available
production. Shame on Saudi

Certainly could make sense to some simple folks
Who trust their government. Again a possible example
of the U.S military complexes lack of responsibility,
again only more thought that the Government itself
is the true disease and Peak Oil a symptom of this
tragedy of the commons.

I love the inputs of fact finding and scientific
prisims... but, rationale par excellence
is not forth coming.
In other words bunk.
Bunk that the agenda is and or ever will be for
some guy sitting behind a computer with an income
near the poverty level. Ironic ...yes poverty and
technology. The AGENDA is more to the effect that my
children enroll in a society whos doctrine
graciously compells them to die heros! BUNK !!!

Thanks for acknowledging my ranting wit.

flame on !!!

Think small, think fast, peace

There is deffinitely a bit of "blame the Saudis" (or Persian Gulf producers in general) going on in the Simmons camp.  The basis for that, of course, is that they are not open about their oil production/reserves numbers.

However, the real "bad guy" in Twilight in the Desert is not the Saudis but the Aramco of the 1970's (which was an American company, a JV between Exxon, Mobil, Chevron, and Texaco).  It is Aramco who irresponsibly advocated premature water injection, shriking ultimate recoveries for short term production volumes.

Fire Temple hi...
I understand that and as critical as i am of
big government > I wonder what incentives and
other contributing Factors
(20/20 hindsight blunders)
could be found.

"I need the facts,just the facts mam."

But that is all ancient history and rather moot.
The situation at hand is worth seriously questioning.
Why? Do people desire to be manipulated...
Does the news reporting media really have a responsibility
to inform factual information? After all observation
of most news channel viewing of others(by myself)
reveals how it is all very entertaining, and
(entertainment is very big biz in this country) the
biggie news networks supply an individual with lots
of water cooler tid bits. Aren't we all armchair
quarterbacks, mostly everyone has an answer!?

I am still awaiting the topless female News anchor.
giving -
  "Glued to the Boob Tube!"
**TRUE meaning.**

Think fast, think small, peace

There is definitely a bit of "blame the Saudis" ... going on in the Simmons camp.

"Blame" is a phony noise that humanoids make into the wind after SHTF (sh*t hits fan) so they can decide in a "fair" way who to kill off once the system no longer can support the entire population or the current status quo.

"Blame" is part of a primitive making of sacrifice to appease the gods.

It's really a waste of time and energy for us to play the Blame Game.

We are where we are.
How do we go forward?

If blame is primative what is persecution?

Blame is placed where accountability is missing.
I feel blame is very modern. It is civil critisism.
Blame can be a fact finding venture?
Perhaps... blame is misplaced on most occasions.

Lets go get a dictionary...

Simply my friend blame is -

"To find fault (error) with."

How do we go forward?

Well if I know the system errors I can correct them.

One whom is on the edge should be aware of which
direction they are facing before stepping back.

Ancient North American Indians knew that in order to
destroy (rid) the entire tree (problem) > permantly <(solve)
it must be cut at the roots (Solved).

I blame the roots for the leaves , branches growth.

Huuummn... some could say its the Suns fault
or the rains or mine for mentioning it.

Yawn... Or still it is no ones and nothings.
No problems - worries / No body - crime

think small, think fast, PeAcE

Not placing blame simply allows those who are at fault to continue as before. (No blame serves those in power)
"Blame" serves those in power because they always manage to direct the fickle of finger of blame away from themselves.

Almost all despotic governements manage to find some scape goat to make the "ultimate sacrifice" in place of themselves.

Do you honestly believe "The buck stops here"?

When was the last time it really really did?

Picture this:
Cheney comes on TV:
"Dear sucker citizens. Yes we did have a secret meeting to divie up the oil fields of Iraq even before Kerry voted for invading the country (that being before he voted not to invade the country --or was it the other way around?). You got me with my buns showing. I am guilty. I lied. I cheated. I almost got away with it. By the way let Scooter out of jail. It was me who takes the "blame" for Plame-gate. The buck stops here. I take full blame. I duped the Dems. They were easy to dupe. They are "intellectual" dopes. I duped America. I take the blame. I fall on my sword. Don't blame the Bush boy. He is an imbicile. Thank you and God bless."

Pumping the oil faster meant that Saudi Arabia got less money for it.  Since they seem to be spending it on terrorism, this might have been a good thing.
From AFX news feed :-

IEA says Saudi Arabia can increase oil output by 2030
Date   15/11/2005   Source   COM  Related Stories   N/A  
Time   14:59          

PARIS (AFX) - Saudi Arabia has the capacity to sharply increase its oil production between now and 2030 to 18.2 mln barrels per day from 10.5 mln currently, said William Ramsay, deputy executive director of the International Energy Agency, citing what he called relatively reliable sources of data.

Ramsay said that Saudi oil reserves are sufficiently large to reach this level within this timespan, even if the reserves were overestimated by 30 pct and even if there is a sharp rise in production costs.

Producing 18.2 mln bpd would not be a technical challenge but a challenge in terms of politics and the market, he said.

Ramsay forecast that the debate on 'peak oil' (the expected decline in oil production due to the rapid exhaustion of reserves) is distracting politicians responsible for oil strategy from the central issues, and may lead them to take decisions which would not be reasonable today in economic terms.

Ramsay concludes that there are more pressing issues than that of 'peak oil'. He believes that the progress of science and technology will enable the decisions forced by the threat of oil running out to be postponed.

I wonder what are the more pressing issues in the oil industry of greater importance than peak oil that Ramsay is thinking of?

Great interview.  

I think I like this line the best: ...if a field does not have a name today, it won't be done by the end of 2009.

CERA is being unrealitistically optimistic.  They're assuming everything will go right, and all this new production will come online as planned.  But as we saw with Thunderhorse, it usually doesn't happen that way.

Actually, the reason I pushed Matt on this point is that I'm pretty sure he's wrong about the fields being notional.  I think CERA's list is only meant to be illustrative, and there are actually a lot of projects coming on board - it's quite believable there's 16mpbd of new projects.  I don't know about the rig count constraint - certainly a lot of delays are happening, but whether it's more than historically I don't know.  Here's my list (and I stress this is preliminary and I haven't finished validating these, so the list could shift, but I don't think it's going to shift so much as to radically change the conclusion):

Cera 05    Bonga    Nigeria
    Kizomba B    Angola
    Albacora Leste    Brazil
    White Rose    Canada
    Thunder Horse    USA
    Darkhoein    Iran
    Adar Yeil/Tale    Sudan
    Prirazlomnoye    Russia
    Sakhalin I    Russia
    ACG Megastructure    Azerbaijan

Other 05    Clair    UK
    Soroush & Nouraz    Iran
    Rhourde El Baguel    Algeria
    Hassi Messaoud    Algeria
    West Seno II    Indonesia
    Oyong    Indonesia
    Okwori    Qatar
    Al Shaheem Block 5    Qatar
    Al Karkara and A north    Qatar
    Cheshmesh Khosh    Iran
    Sabratha    Libya
    Abu Hadriya    Saudi Arabia
    Mad Dog    USA
    Holstein    USA
    Christina Lake    Canada
    Devon SAGD    Canada
    Caratinga P-48    Brazil
    Bab    UAE
    Asab    UAE
    al-Dabb-iya, Shanaget, Rumaitha    UAE
    Bomboco    Angola
    Mukhaizna    Oman
    Ku-Maloob-Zaap    Mexico
    Crudo Ligero Marino    Mexico
    Lankahuasa    Mexico
    Greater Angostura    Trinidad&Tobago
    Staer and Svale    Norway
    Kristin Deepwater    Norway
    East Al Hair BAK-B    Yemen
    Sanha    Angola
    Moho/Bilondo    Congo
    Saqqara    Egypt
    Mutineer-Exeter    Australia
    Peng Lai    China
    Luda    China
    Irong Barat Sat C    Malaysia
    Thai oil development    Thailand
    NEAD (NE Abu Dhabi)    UAE
    Salym    Russia
    Murzuk basin D-field    Libya

Cera 06    Buzzard    UK
    Bu Hasa    UAE
    Erha    Nigeria
    Atlantis    USA
    Dalia    Angola
    Roncador P-52    Brazil
    Tengiz    Kazakhstan
    Haradh III    Saudi Arabia
    Sakhalin II phase 2    Russia
    Chinguetti    Mauritania

Other 06    Piranema    Brazil
    Golfinho I    Brazil
    Northern Basin    Kuwait
    Banyu Urip    Indonesia
    Shaybah    Saudi Arabia
    Constitution    USA
    Coroco    Venezuela
    Primrose North    Canada
    Surmont    Canada
    Sunrise Thermal Project    Canada
    Northern Lights    Canada
    Jubarte I    Brazil
    Upper Zakum    UAE
    Tempa Rossa    Italy
    Thar Jath    Sudan
    Enfield    Australia
    Egret    Brunei
    Krishna Godavari    India
    Kurmangazy    Kazakhstan
    Shah Deniz    Azerbaijan
    Vadelyp    Russia

Cera 07    Plutonio    Angola
    Rosa    Angola
    Lobito/Tomboco    Angola
    Marlim Sul Mod 2    Brazil
    Marlim Leste P-53    Brazil
    Roncador P-54    Brazil
    Khursaniyah    Saudi Arabia
    Azadegan (IandII)    Iran
    Kikeh    Malaysia
    Vankorskoye    Russia

Other 07    East Area Oil    Nigeria
    Bosi    Nigeria
    Eti/Asasa    Nigeria
    Golfinho II    Brazil
    Espadarte    Brazil
    Berkine Basin    Algeria
    Hawiyah    Saudi Arabia
    Tahiti    USA
    Suncor    Canada
    Block G    Equatorial Guinea
    Mangala    India
    Neptune    USA
    Alvheim/Vilje/Hamsun    Norway

2008    Kashagan    Kazakhstan
    Usan & Akpo    Nigeria
    Primrose East    Canada
    Horizon Oil Sands Project    Canada
    Kearl Mine    Canada
    Kizomba C    Angola
    Agbami    Nigeria
    Blind Faith    USA

2009    Bonga SW    Nigeria
    Plutao, Saturno, Venus, Marte, Palas, Ceres, Juno and Astraea    Angola
    Frade    Brazil
    Nuayyim    Saudi Arabia
    Fort Hills    Canada
    Hunt Oil Camisea    Peru
    Khurais    Saudi Arabia
    Athabasca Upgrade    Canada

2010    Golfinho III    Brazil
    Jubarte II P-57    Brazil
    Albacora Extension    Brazil
    Roncador P-55    Brazil
    Sincor II    Venezuela
    Hebron    Canada
    Syncrude Phase IV    Canada


Yes, there's a lot of production coming online.  But it all has to come online, on schedule, or it won't be enough to offset the depletion of the aging giants.  

I don't think it will.  There's a lot of oil still out there, but I think we're probably past peak now.  Thanks in large part to Katrina and Rita.  

I agree delays and depletion are the issues that we need to understand better. If indeed FIP declines at 8% annually as Schlumberger CEO Andrew Gould has said, then we need around 6.5mbpd of new capacity each year, just to stay level, and the new projects are not enough after about next year (roughly, depending on delays). If FIP is declining more in the traditionally quoted 4-6% range, we go somewhat longer.
Simmons may not think that the projects can provide 16 mb/d, but what he's stressing is that it will be hard to add net capacity.  Keep in mind that Yergin predicted a net capacity rise of 16 mb/d, which means that he must think that new projects will provide far more than 16 mb/d, even if he vastly underestimates declines.  

I think it's reasonable to say that declines from the current base of production could easily total 25 mb/d by 2010.  It seems doubtful whether smaller fields and infill drilling could make up for this shortfall, let alone continue to meet rising demand.

Well, I specifically asked him:
SS: Let me get this clear, are you saying you don't think there's 16 million barrels a day of new capacity, or are you saying there may well be 16 million barrels a day, but you don't think they're taking into account the decline?

MS: I don't think they can possibly do 16 million barrels a day with this list of projects without naming them. I think they're notional projects.

I formed the impression in talking to him before the interview that he's racing around at 90mph talking to everyone, can't up keep with his email, etc. So he probably hasn't had time to go study Rembrandt Koppelaar's report in detail, cross-correlate Chris Sebrowski's list with CERA's etc. That's probably one of the dangers he faces as the most prominent peak oil public figure right now. And I think it's important, that while we recognize the tremendous courage and energy he's bringing to that task, we don't shy away from looking at places where he may not have the story exactly right. At least on the Oil Drum, I think our commitment should be 100% to the facts, whoever's ox ends up having to be gored in the process.

Do you know if MS reads the Oil Drum?
I don't think so - at least not in the past. Unlike Richard Heinberg, who told me he does daily.
I guess one question is the specific wording of the full CERA report, which I don't have. Often confusion arises when comparing apples & oranges. Did CERA claim that the 16 mb would come from the listed projects? One questions why these are the only ones listed. They did claim in their release to have conducted a thorough review for the report. If all they documented was the ten projects per year, shame on them for charging so much and not providing the complete information to allow others to properly assess the findings. If these ten projects/year are what the 16 mb was based on, then MS may be offering a proper, but incomplete criticism. I think the time was just too tight for him to clarify exactly what he meant, although you tried.

Thanks for your fabulous work. No one (including MS) needs to be perfect to make a contribution.

No, I believe CERA only claimed the listed projects added up to a shade over 6mbpd - it seemed clear in the presentation that the lists were illustrative. I had assumed hitherto (being too cheap to buy the report), that the full report had the complete list, but apparently not. Which does seem remarkably poor value for money. And I completely agree with your comment about perfection.
Thanks for your reply. This just further calls CERA's already poor credibility into question.

Don't want to beat a dead horse, but MS certainly knows there are many more than 10 projects out there - his group is probably financing some of them. I think there just wasn't time to clarify his position. I find his response to you confusing and ambiguous, and I know he's a better thinker than that.

... our commitment should be 100% to the facts, whoever's ox ends up having to be gored in the process.

Thunderhorse is delayed into 2006.

Tahiti is delayed into 2008, and will only add 120,000 bpd that year.


Yes, you can find my updates on the various CERA listed projects for 2005, 2006, and 2007. I need to completele the equivalent analysis for the non-CERA listed projects (but it's a lot of work and many things distract me).
Wow, what a great interview!  If Simmons had just
talked that way in his book, I think it would have
been more accessible to and influential with the
public at large.  The story of how he got involved
in the question makes his whole thesis much more
Exactly my thought. First, though, kudos for the great interview, best i have ever read on this subject. The interview provides great credibility for the book, and makes you wonder about the background of those debunking it.
Thank you Stuart for the "color" you have added to the ASPO-USA conference and to the life story of one of the major "peak oil" figures.

I am a big fan of Simmons for his courage, energy, intellect, human decency and humor.

Great interview, Stuart. Thanks so much. While we are talking about production delays and snags, there was an interesting article in the Wall Street Journal this past Saturday, 11/12 on page A5A: "Small Gulf Producers Miss Windfall." It went on to state that at least some small producers who work the shallow Gulf of Mexico are de-emphasizing or giving up on operations there due to the hurricanes. Seems like the price incentive has been counterbalanced by the weather disincentive, both in terms of outlays for insurance/ repair, and in terms of cash flow predictability. Who needs to spend $20 million on an offshore project that yields x barrels per day, when you can spend the same amount onshore, and know that weather won't interrupt your business, the interviewees said. Between the lines it sounds like some small deposits in the the shallow GOM will now go untapped, unless prices go much higher.

I don't subscribe to the Wall Street Journal online so I can't provide the link.

The article is behind a subscription wall, but here are a few excerpts...

With "Big Oil" under political fire for posting record profits on the back of buoyant energy markets, small exploration and production companies operating mainly in the shallow U.S. Gulf of Mexico are struggling to make ends meet.

Heavily exposed to the destruction wrought by hurricanes Rita and Katrina, small-cap companies such as Energy Partners Ltd. and Meridian Resource Corp. have seen their third-quarters profits plummet along with production levels, at a time when energy prices hit record highs. At the same time, drilling and insurance costs have increased as a result of the storms.


"The cost structure in the Gulf of Mexico is clearly going to ratchet up," said Dan Pickering, of Houston-based Pickering Energy Partners. "For the smaller players it's going to be a more challenging place to do business -- and it's going to result in fewer smaller players in the Gulf of Mexico."

The experience of the smaller companies underscores that unlike their much bigger counterparts operating in the Gulf's more lucrative deeper water, they lack the global scale, leverage and ability to spread risk.


Some of the largest among the small Gulf exploration and production companies are abandoning the region for more predictable pastures. These divestments aren't a consequence of the most recent storms, said Mr. Pickering; they're a response to investor preference for cheaper, more stable growth.

Houston Exploration Co. Chief Executive William G. Hargett said during a recent conference call that giving up its sea-legs will make it easier to control spending and bring "far fewer surprises". The company, originally a Gulf offshore producer, will concentrate its efforts in Texas and in the Rocky Mountains. "Our production and the company growth will be more stable and consistent," Mr. Hargett said.

The Gulf of Mexico has good returns, but high investment requirements and wells decline rapidly, said Mr. Pickering. "It's a treadmill," he said. "Wall Street is looking for production growth, and production growth in the shallow Gulf is tough."


Hope I haven't abused my cut-and-paste privilege too much...

Thanks for providing us with this interview and background information.

Although I don't know the exact costs of all this new
production coming on line, I get the distinct impression that the cost of this incremental production is many multiples higher than that of the major existing fields.  Or, in other words, should production manage to keep up with demand, the cost of energy will increase anyway.

I am more interested in what countries will increase their production levels in 2009 over 2005 (and by how many bb), rather than individual fields. Does anyone have information on what : Saudi Arabia, Canada, Russia, Iran, Iraq, Libya, Algeria, Kazakakhstan, Brazil, Nigeria and Azerbaijan will increase their production by in 2009. These seem to be the only countries in the world with the ability to significantly increase production.
Stuart, wonderful interview, thanks! I had no idea about his background in Utah, at Harvard B. School etc - but from the information he gave found an interesting link about his family - quite a collection of business people!
Anyone know if MS has been on Charlie Rose yet? That format would be ideal for the in-depth discussion that PO requires.
A very good interview Stuart, WELL DONE, i get the feeling he was a little excited and more than happy to talk with someone that knows the oil and gas industry very well.

It is truly scary to think that people just "fake" info just to appease the listener. Wasn't it Pres. Reagan that said "trust, but verify"? Now, can we please just verify those Saudi books?  

I think that overstates my qualifications. I'm a quick study, but I knew very little about the hydrocarbon industry before this year.
You should consider reading Petro-Dollar warfare. It gives quite a bit of well documented information on these issues, along with a chart of reported reserves for several Middle Eastern countries, including Saudia Arabia. Interestingly, the chart shows an abrupt change in reported reserve capacity. Personally, I had heard of such things before, but seeing the chart really drives the point home.