2005 Exploration Round-Up

Looking back on the plus or minus 15 billion dollars (my estimate from studying Wood MacKenzie and other data) that publicly-traded companies spent on exploration in 2005, what did they get for their investment, and what are the themes that emerge?  Who were the winners and who were the losers?  Where is the action and where have these companies given up on?

First of all, my reading of the data, plus my own personal experience leads me to discern the following themes: Deeper water, deeper reservoirs, smaller discoveries, more gas, less oil.

Deeper water, deeper reservoirs

Over a third of all discovered volumes from 2005 came from deepwater basins.  Of the three most significant deepwater basins from an oil-production perspective - the Gulf of Mexico, the Gulf of Guinea of the coast of West Africa, and offshore Brazil - deeper water and deeper reservoirs are definite themes.   Exploration wells in the GOM are commonly being drilled in water depths greater than 9000 ft with total well depths greater than 30,000 ft.  Exploration well costs are running up to and over $100 million per well (with daily deepwater rig rates running upwards of $500,000 per day).  Currently ExxonMobil is in the midst of drilling the renowned Blackbeard West well.  This well is being drilled in shallow water off the coast of Louisiana with a prognosed TD of greater than 30,000 ft.  Rumors have it that the well cost was already over $100 million with 9,000 ft remaining to drill.

Smaller discoveries

No truly significant discoveries were reported in 2005.  There were no billion barrel (or barrel equivalent gas fields) announced in 2005.  Even more ominous, IHS reports that potentially producible volumes from world discoveries in 2004 and 2005 were the lowest recorded since WWII.  Overall they report 4.5 billion barrels of oil and 32 TCFG from 320 discoveries worldwide for 2005.  As a comparison, 4.5 billion barrels of oil is a 53 day supply of the world's oil usage.

Some of the more notable discoveries include Knotty Head in the deepwater GOM (GC 512) which has had some speculation that it could contain 500 million barrels of recoverable oil.  

Angola's Deepwater Block 31 had 5 discoveries that combined are estimated to contain over 600 MMBO of oil.

And not strictly in 2005, but in January of 2006 Lukoil reported a Caspian discovery (Y-Rakushechnaya) containing and estimated 600 million barrel equivalent of oil and gas.

More gas, less oil

Shwe Phyu 2 in Myanmar is a gas discovery that has a reported 650 million barrel equivalent of recoverable gas. Elsewhere, some big gas discoveries in Australia (Pluto 1, Caldita 1), gas discovered off eastern India in the deepwater portion of the Krishna-Godavari basin, also sizeable finds were reported in Iran, China, and Peru

Emerging plays and other areas

In Brazil a newly emerging play involves drilling through and below the Aptian-age salt in the Santos Basin to test potential oil or gas reservoirs below the salt.  As usual in Brazil, Petrobras is leading the charge, but Exxon, Shell, Statoil, British Gas and others are involved as well.  This is extreme wildcat exploration, no with reported discoveries to date.  The companies involved in this play are spending hundreds of millions of dollars on something that may turn out to be a complete dud.

In the GOM most of the action continued to be in the eastern and western Paleogene play and the Miocene structure play below salt.  The Paleogene has had a lot of action with billions of barrels of oil discovered in place, but the combination of extreme deepwater, deep reservoirs, low permeability, and undesirable fluids has left oil companies scratching their heads about what to do with all of these barrels in the ground.

In Europe I would characterize the 2005 results as more of the same - a couple of small (less than 100 MMBO) oil discoveries in the UK portion of the North Sea, with some sizeable gas finds in the Norway portion of the North Sea.

So to answer some of the questions above - who won and who lost in 2005.  None of the IOC's appear to be big winners.   Of the 9 discoveries reported to be greater than 100 million BOE, the operators include BP, Woodside, Daewoo, Shell, Lukoil, ONGC, ConocoPhillips, Unocal, and Gujarat SPC.  

Overall I would say we are all losers.  More money chasing smaller volumes in more and more difficult areas.  The remaining unexplored areas of the world are fewer and fewer.  Not a lot of smiley faces here.

The Growing Gap is growing.

In 2005 for each barrel of oil founded we consumed six and a half. Like prof. Bakhtiari says oil reserves accounting is now a thing of the past.

1 : 6.5, oh well, business as usal.

Oh man. This is a truly depressing post.
It put me in a frame of mind to see where the next big energy opportunities are.  Like wind, nuclear, coal-to-liquids, maybe some biomass.

Or maybe I'm already too depressed to be affected further.

Let's start with the easy stuff - the demand side of the energy balance equation.  For example - it was through some of your writing E-P (plus a $3150 tax credit) that I decided to trade my old 18 mpg car in for a 45 mpg Prius.
Darn it, there goes my head swelling up again.
Oh, no! That's all we need. I thought things were bad enough.

best, Dave

Bingo.  We'll see major growth in energy conservation and diversification: Improving building insulation, upgrading climate control equipment, keeping cars in tune, compact fluorescent lights, add-on heating units (like wood pellet stoves) to let people use "hybrid heating", consumer-side solar and wind, etc.

All the people who bitch about how "people won't conserve energy" are in for a shock.  The major shift in the US car market away from trucks is just the tip of the tip of the iceberg.

Lou, I think the issue here is how long it will take to switch out the vehicle inventory. Estimates I've seen say on the order of 15 years. Of course, that might speed up a bit if the prices go skyhigh and the more efficient vehicle supply can meet rapidly increasing demand.

As far as people "bitching" about "people won't conserve energy" goes, I agree--what else are they going to do? But this too will take some transition time. It won't happen overnight. I take it you're not a big believer in Jevon's Paradox.

But geopolitical oil shocks are the wildcard. And anyone with a functioning brain and a little imagination will have little trouble thinking up disasters that could happen. If that Al-Qaeda attempt at Abqaiq hadn't been such an amateur job, this week would be very different than it is.

It occurs to me that there's a big difference between "registered" and "on the road".

This is highly significant, because all the old econoboxen used as winter cars could easily become primary vehicles overnight.  The guzzling trucks that people commute in today could wind up parked most of the time.  What difference does it make if a vehicle is registered, if it isn't driven?  Reverse the current vehicle preference, and fuel consumption would fall without any change in what's "on the road" measured by registrations.

Maybe, maybe not.  The industrial side may just bag it, like fertilizer manufacturers, and offshore everything.  On the individual consumer side it's hard to see where they're going to get the money in a time of declining incomes and rising prices.
Good move. Enjoy!
Well, now that I've done replying to your posts on the other thread, I'm truly depressed too.

That's going to be enough sparing for me about the end of the world for a few days. Better go take my St. JOhn's Wort. (that's my code word for "stiff drink")



What about reserve growth?
The USGS was predicting a least 300Gb in reserve growth.
There was a mild disagreement a few weeks back here at TOD about such terminology: apparently the use of "USGS" in conjunction with "forecasts" or "predictions" might be incorrect and misinterpretation ;)

I'm sure that reserve "revisions" will easily fill the shortfall in discoveries, on paper at least, for a couple more years anyhow. After all, there are still perhaps 1,000 Gb, maybe more, of reserves still in the ground, it would only take an annual 2.5% upwards "revision" to solve the discovery shortfall. Of course, revisions can cut both ways - might be troubling when we come to the days of downwards revisions. But I don't expect those days to arrive before peak oil is recognised, in fact I suggest that may be a sign of admission that peak oil has arrived.

You will be seeing some downward revisions in some companies reserves coming out that have nothing to do with how much oil is in the ground.  They have to do with the structure of the production-sharing contracts that they have with foreign governments.  As the price of oil goes up, these companies pay off their investments earlier and their share of both "cost oil" and "profit oil" goes down.  The companies make more money overall, but their "reserve base" has to be re-adjusted downward to reflect the higher value for the oil.
You have got to stop believing the USGS.  Their reserve assessments and future predictions are divorced from the reality of what the industry is actually finding with the drill bit.  

Think of the USGS, for the most part, as academics.  They are good scientists, but you would never hire them to help you find oil that you really wanted to produce and sell.  

Morover, there may be 100 geoscientists working in industry with far bigger budgets and far better data compared to each geoscientist working for the USGS.

Control of the world's remaining oil supplies is going to be the fundamental question confronting us in the coming decades. Already the United States has a huge army in the Middle East likly to remain there forever. Are we going to opt for "regime change" in Iran, followed by Venezula? Is this "answer" to PO the correct one? Couldn't we adopt another less "militaristic" approach? How will China react to the United States taking control of the world's oil supplies by force? Do we really want to go down this potentially very dangerous road?
Isn't it obvious that the military solution to the oil-control issue is a morally reprehensible one?  And shouldn't that alone be sufficient to lead any decent human being to reject it out-of-hand?
Moral decency reserves are being discovered at an even more depressing rate than oil, Phil.
Yes...and, No. "Morality", it seems to me, is becoming as rare as hens teeth in our part of the world, especially in relation to our political leaders. Oil is worth more than blood. We are not only criminals, on top of it all we're grosslly hypocritical and ignorant. For example, most poeple in our part of the world simply don't know that in the war/siege/war/occupation of Iraq we've managed to cause the deaths of around 1,000,000 Iraqi men, women and an awful lot of children, especially children. We've justified this by saying it was "a price worth paying", to rid the world of Saddam. But the cost? We didn't pay it. The Iraqis did. Given the results, isn't the "price" morally speaking outrageous and totally unacceptable? On the great, golden scale of history one man for a million? And we have the gall to gall ourselves civilized, who are we kidding? Certainly not the people who live in the Middle East, they know about our dirty, secret. And then we wonder why they hate us? Just think how we'd react if an arab fleet sailed up the Thames, bombarded Lonon and caused even 10,000 civilian deaths?
So. How long before a general conscription?
Our esteemed chancellor mused the other week that he would like to see an expansion (doubling) of the Combined Cadet Force into all schools.
Next up: ID Cards (no card?- you dont eat...). I am pretty sure UK Gov knows the game is pretty much up.
SLB recently ran this news story:

"ExxonMobil Corp. (XOM) booked more hydrocarbon reserves than it extracted in 2005 - but almost all of the additions come in the form of natural gas from Qatar."


This means that without gas from Qatar, Exxon would have booked nearly nothing in new reserves in 2005!!  Bubba, have folks inside the industry started any serious discussion of peak oil yet?

There are some of us, but we don't discuss it very openly.  
More bad news for XOM:

http://yahoo.reuters.com/stocks/QuoteCompanyNewsArticle.aspx?storyID=urn:newsml:reuters.com:20060301 :MTFH62804_2006-03-01_12-26-53_L01550302&symbol=XOM.N

What's most interesting to me is that they received an exploration license on this block in 1999 and it took them until 2006 to actually begin drilling.

Is this a typical lead time or are the majors being extra deliberate about these wildcat ventures these days?

Good post Bubba.

The data appears to confirm predictions of peaking oil and NG.  It doesn't surprise me because I expected this based on all the posts at TOD.

Kind of depressing in one way but very useful in another.  At least now we can start to dismiss the speculation that new fields will allow business as usual with respect to energy consumption.  The world is just going to have to face the irrefutable evidence that oil and NG supplies are going to decrease in the future.  Only after that acceptance can change take place.

I am not quite so nervous about the resource wars.  Not every body is so short sighted as to think that consuming huge amounts of energy, fighting wars, is the best approach to obtaining more energy.  Careful analysis might show this to be a zero sum game or even net loss of energy to the aggressor.

I have not doubt it's a massive loss of energy to the aggressor, but people are not always (often?) rational.  Think about the opportunity cost of not having the money and resources spent on war to use for infrastructure changes.

6.5:1  Damn, just think about that!

Sometimes aggression in war pays off bigtime; for example, the Mexican War, in which the U.S. (unknowingly) acquired much and probably most of its petroleum. If you lose your war of aggression, then you lose. For example, when the U.S. cut off petroleum exports to Japan, they attacked us, seized major oil resources in SE Asia and fought hard to hold on to them. They lost--bad bargain. Hitler had a brilliant strategy to send Rommel east through north Africa while another army swerved south through Russia to join up approximately in oil rich Iraq. He came very close to succeeding but had a couple of problems, partly due to stupidity in trying to take Stalingrad instead of marching quickly to the south of than unnecessary city. Also, defeat in the Battle of the Atlantic (which was a very narrow margin--depended on Brits destroying or bottling up German surface fleet, also on U.S. seizure of Iceland in July 1941) meant that the Germans lacked the resources to assure that Rommel could get the supplies he needed in his drive to Suez.  

Allied victory was not inevitable. The Axis (and it was a true axis of Evil) came much closer than most of us realize to winning.

Thus, I think the correct generalization is that failed aggression is a bad strategy for solving energy problems. And since aggression by anybody (U.S., Russia, China, anybody) in the Middle East is likely to fail to secure oilfields at acceptable cost, then my personal preferance would be for the U.S. to pull out now, declare victory, and let the whole place burn. If Iran is about to get the bomb, a little birdie tells me that somebody has a plan to put them back in the dark ages. So forget about Iran. Let the Shiites slaughter Sunnis and vice versa. Let them fight themselves for the next century--and let us put a tariff of $100 per barrel of oil imported from the nasty parts of the world to quickly wean us from this toxic substance.

I wonder what we really won with the Mexican war, long-term.
We received Texas and access to GOM, so we got a huge oil industry, Rockfellers, easy motoring, suburbs and G.W.Bush.

Probably we'd be better off without them now, don't know.

The point is that you don't know what you lose when you win and vice versa. A notable part of the history of Bulgaria is the reign of Tsar Simeon that conquered the whole Balkan Penisula and almost took over Konstantinopol (the cunning Byzanthiums were lucky they could provision the city by sea). Very good, but these successes exhausted so much the country that it started to descend, and after a century or so the same Byzanthiums that begged us for mercy took over the whole country quite easily.


Don't forget the Bushes are transplanted Connecticut yankees, despite their protestations to the contrary.

Ahhh! So that's where the "Don't Mess With Connecticut" T-shirt comes from...
Wars of aggression for economic gain are always a big gamble: sometimes you come out ahead, and sometimes you don't. Unfortunately, it's usually the latter.

Nowhere does the Law of Unintended Consequences raise its ugly head than in war. And most of those unintended consequences are not good for either the victor or the loser.

 As far as I can tell, everybody who participated in WW I was a loser in one respect or another. France and Great Britain exhausted and bankrupted themselves, and while they contained Germany's rising power, that didn't last very long and led directly to WW II. Russia overthrew a tyrannical monarchy, only to replace it with a tyrannical communist system. The US had no business being WW I at all,  other than to placate the worried ruling WASP elite who didn't want to see their chums, the Brits lose to those nasty Huns and default on all the money we loaned them.  And all the rest of the smaller countries suffered appalling casualties and economic loss. A perfect lose-lose game.

Regarding WW II, I take a somewhat revisionist view. While we defeated a meglomaniacal Nazi dictator bent on world domination, doing so made the world safe for a meglomaniacal Russian communist dictator bent on world domination.

Defeating Japan (which was not as difficult as popularly portrayed, owing to the fact that our industrial capability was  roughly 10 times that of Japan's) eliminated an aggressive imperialist country, but led to Mao taking over China, and we all know what a positive development that was.

While the US came out on top, it found itself engaged in a 50-year Cold War that has sapped trillions of dollars out of the productive side of the economy to pay for a perpeptual military-industrial complex.

The Korean War and Vietnam were both such a bust that nobody I know even tries to point out anything positive about either.

So, I don't buy a lot of the nostalgic folklore that has gathered around WW I and WW II. WW I hardly made the world safe for democracy; but it might be argued that WW II made the world safe for communism. It was all folly on a grand scale.

I respectfully disagree that it was "folly" to destroy Hitler, Mussolini, Tojo, and Co.

In regard to making the world safe for Soviet communism, I have not noticed many Soviet communists lately.

BTW, have you read "Oriental Despotism" by Witfogel? A classic I highly recommend to all.

So, you think it was preferrable to support Stalin as we did,  who slaughtered more of his own people than Hitler, Mussolini, and Tojo combined and enslaved Eastern Europe for almost half century?

Well, in a very real sense WW II DID make the world safe for communism, for it enabled both the Soviet Union and Red China to flourish.

The Soviet Union collapsed under its own weight (a fate that could be in store for the US), not through any heroics on the part of the US.

Red China (excuse me, the Peoples Republic of China) is still a brutal totalitarian state and our most likely advesary should a hot war eventually develop over resources.

Mussolini was a  buffoon, so you shouldn't insult Hitler and Tojo by mentioning him in the same breath :-)

My whole point was that WW I was a total unredeemable folly, and that WW II produced just about as many negative results as positive ones. Our former enemies,Germany and Japan, are now our friends (to use the term very loosely); and our former ally, the Soviet Union, became a mortal enemy for almost a half century. If Hitler had defeated the Soviet Union, we would probably have engaged in a similar cold war with a nuclear Nazi Germany. So take your pick of enemies.

Another Wittfogel fan!

Here's my review on Amazon, looking at it from a different prespective:

Deep Germanic insight into pre-industrial geopolitics,July 24, 1998
Reviewer: somsel@aol.com (San Luis Obispo, California) -
During an argument about California's water policies, I hear a Sierra Club representative pronounce that all irrigation-based societies were short-lived. Wittfogel shows just the opposite: at least in pre-industrial societies, cultures that can organize reliable agricultural irrigation schemes have been remarkably stable, productive, and powerful. The downside is that the conditions encourage rigid and despotic social forms. Book is weakest trying to make a case that Soviet Communism was a cultural descendent of Babylon (although Marx thought so too). The Germanic "Big Thought" style is stimulating for most of the book but gets a little heavy-handed in spots when it drifts away from hard facts. You don't have to read the whole thing to get the idea. It has a lot to say about the interplay of culture and environment.

Let us start a Wittfogel Fan Club as a spinoff of TOD. As some clever dude once said, "Those who do not study history are condemned to repeat it."
"Those who cannot learn from history are doomed to repeat it." - Santayana

"History is merely a list of surprises. It can only prepare us to be surprised yet again." - Vonnegut

"One of the lessons of history is that nothing is often a good thing to do and always a clever thing to say." - Durant

More fun history quotes here:

Agreed.  History is repleat with resource-costly military follies and adventures.

To quote from the military master Sun Tzu:  
"Raising a host of a hundred thousand men and marching them great distances entails heavy loss on the people and a drain on the resources of the State.
The daily expenditure will amount to a thousand ounces
of silver.  There will be commotion at home and abroad, and men will drop down exhausted on the highways.
As many as seven hundred thousand families will be impeded
in their labor."

"There is no instance of a country having benefited from prolonged warfare."

Rome benefited from prolonged warfare with Carthage.

I challenge you to find a single historian to dispute this statement.

Yes, but how much did Rome benefit from several centuries worth of more or less continuous warfare with the Germanic 'barbarian's relentlessly nibbling away at the corners of its far-flung and overextended empire?

Rome's wars with Carthage might be more analogous to WW II, while its long struggle against the peoples to the north might be more accurately compared to Vietnam or the current debacle in Iraq, though I would not want to push such an analogy too far.  And as is well known, Rome went into permanent decline not so much due to outright military defeat, but rather due to the erosion of its economy and the corruption of its society that a prolonged open-ended war inevitably brings.

You are begging the question.

War obviously benefits the victors in many cases. For example, people of European ancestry fought Native Americans for 300 years to conquer the Americas. Now we white American citizens are fat, mostly dumb, and at least diverted, while most of the miserable descendents of the losers live on handouts or casinos. The wars against the Native Americans were the toughest wars U.S. whites ever fought.

BTW, it helps to fight well even if you lose. One can make a case that the Native American tribes (e.g. Seminole or Cheyenne) who fought the best, longest, and hardest are in less bad shape than others, such as the Mandan, who were wiped out to the last man, woman and child by our genocide through smallpox and alcohol plus a bit of shooting. Also, if you look at the history of New Zealand, you will find that the Maoris, fighting with spears, fought the gun-toting British to a standstill, and the treaty they signed with Queen Victoria has never been violated. Furthermore, I think many and probably most sociologists would grant the point that New Zealand has better race relations between its indigenous people and people of European ancestry than any other country.

'War' is not the proper word to describe what took place between the European settlers and the Native Americans, Little Big Horn being a notable exception.  

No, 'rape' and 'genocide' would be a more accurate description.  

Look, in all wars or armed conflicts there are obviously winners and losers. My point is that the winners usually don't wind up winning nearly as much as they had hoped, and in many cases the war had brought down more problems upon the winners than if they had never started the war in the first place. War is usually a very bad investment.

In my opinion, the last Åmerican war that was fully morally justified and had a clear-cut benevolent outcome was the Revolutionary War. Most of our wars that followed either were of dubious morality and/or had as many negative results as positive ones.

In this day and age of so-called 'fourth generation warfare' (see the articles by military analyst William S. Lind)  the very concept of victory has become so muddied as to be almost meaningless. Realistically, what could victory possibly look like in Iraq or Afganistan? We are pissing away billions of dollars each week down a bottomless pit.

Have to agree with your point about the American Revolution being our last morally justified war.  And note that it was also the last one in which we were "the insurgents"...
Don, Don, Don,

A short war is always better than a long war. WWI was a war of attriton that impacts us ALL today. That is why WWII was better, unless you were Soviet or Chinese - it hurts less.

That Carthage and Rome were relatively evenly matched in the 1st and 2nd Punic War made it a long war.

I may be niave on this point but our USA army in Iraq is not about oil. It is secondary. The primary reason is that with a deomcracy and vibrant economy, the large number of young unemplouyed are employed, and hence not an issue. It looks like it is failing and THAT is a big problem.

>>I may be niave on this point but our USA army in Iraq is not about oil. It is secondary. The primary reason is that with a deomcracy ...<<

Silly me!  And I thought it was because of all the WMD!  But that can't be because there was none.  Hmmm, now WHERE did I possibly get THAT idea?


I have always argued, perhaps wrongly, that Bush thought that by introducing democracy into the region that it would cure the ticking time bomb of over-population especially of young people, who have no jobs and get a little desperate. The biggest failing of this regime is that they do not understand foreigners. Bush's experience outside of Mexico and visits beyond Texas is really quite small pre 2000 election and the war in Iraq reflects it.

Good intentions poorly executed.

And they honestly though there were WMDs.

By your command.....

"Italy itself suffered cruelly in the war. Hannibal spent fourteen years there, mostly in southern Italy. During much of this time, both sides ruthlessly burned fields and orchards, slaughtered livestock, and destroyed villages. As the years went by, the steep hillsides began to lose their topsoil. By war's end, southern Italy was permanently impoverished. In fact, in our own century, in the 1960s, the Italian government began to attempt to recover and reclaim the land from Hannibal, an effort that still goes on fitfully. Hannibal's legacy outlived Rome itself."

"By 146, Rome had been at war for nearly a hundred years, almost without respite. The effort had taken its toll. The city now ruled an empire that stretched from one end of the Mediterranean to the other, but it ruled that empire with a government that had been designed to rule a city-state.
The strains would prove too great for the Republic. It took another hundred years for the Republic to fall apart, and that is the subject of the next narrative."

courtesy of College of Staten Island, City University of New York

Allied victory was maybe not inevitable, but it would not have been possible without the Texan reserves acquired earlier from Mexico. Other posters wondering if we would have been better off without Texas would in that case be speaking German today, and synagogues would be a thing of the past, not even mentioned in history books.
To be unhappy with past events is to be unhappy with all aspects of the present.

The Brits first occupied Iceland and than gave it over to the Americans. Goes back to April 1940 and the invasion of Denmark. The three hour war.

The U.S. occupied Iceland for one main reason--to prevent the Germans from occupying it and using Iceland for land-based aircraft to win the Battle of the Atlantic.

If the U-boats had won the Battle of the Atlantic, then Britain would have been unable to stop Rommel from racing through Egypt to the oil fields, and if necessary bailing out Paulus at Stalingrad.

Thus, the U.S. Marine occupation of Iceland was a crucial event in the war, and to celebrate it I shall here type out the lyrics to Herman Wouk's least-known work: "Ballad of the Leatherneck Corps."

Oh, the wind blows cold in Iceland, but the
wind's blown cold before,
And, it's not so hard in your own backyard
to be set for peace or war.
But, to fight for right and freedom, and to
keep our honor clean,
We are proud to claim the title of United
States Marine.

Oh, the wind blows cold in Iceland, but the
wind's blown cold before,
And, it's not so hard in your own backyard
to be set for peace or war.
But, to strike a blow on a distant foe, is a

Where are you heading, Leatherneck?
I'm off to Tripoli, son! It's someplace in
Africa, don't know where,
But, an ornery pirate gang is there,
And, we're under orders to sweep it bare of
each pirate son-of-a-gun.
So, off they went, it was eighteen five,
And, they piled in there with a mighty
'Til hardly a pirate was left alive.
And, Jefferson said: "Well done."

Oh, the shore is strange in Iceland,
But, the shore's been strange before.
And, the folks at home don't have to roam,
To be set for peace or war.
But to challenge fear when it's far from
Is a job for the LEATHERNECK CORPS.

Where are you heading, Leatherneck?
I'm off to Sumatra, son.
The natives there are a savage lot,
Our ships have been sunk, and our sailors
And, that place which they tell me is
burning hot,
Will be hotter before we're done.
So, off they went, back in thirty-two,
And, vengeance was had for each murdered
And, over the isle, Old Glory Flew.

And, Jackson said: "Well done."

Oh, the sea is rough off Iceland,
But, the sea's been rough before.
There are no rough seas where you sit at
All set for peace or war.
But, to face a foe half the world away,

Where are you heading, Leatherneck?
I'm off to China, son!
A bunch of Boxers are raising hob,
They're killing Christians, this crazy mob,
So, the U.S. Marines have got a job,
And, this one looks like fun.
So, in nineteen hundred, they sailed away,
And, fought the Boxers in old Cathay.
Pagodas crashed and they won the day.
And, McKinely wired: "Well done."

Oh, the gale roars high in Iceland,
But, the gale's roared high before.
And, it's cozy here, by the hearthside cheer,
To be set for peace or war.
But, to make a stand, in a far off land,
Is a job for the LEATHERNECK CORPS!

Where are you heading, Leatherneck?
I'm off to Iceland, son!
There's trouble brewing across the map,
And, it may, or may not, be our scrap,
But we ain't gonna wait til it's in our lap!
We'll head it off on the run!
So, off they march at a soldier's pace,
And, we pray that they have no fight to face
But, they've gone there anyway just in case.
And, America says: "Well done."

Oh, the nights may be long in Iceland,
But, the nights been long before.
And, it's not so hard in your own backyard,
To be set for peace or war.
But, to beat the worst, by arriving first,
Is a job for The LEATHERNECK CORPS!    


Great poem. I have not heard that one before. I certainly agree that the Battle of the Atlantic had to be won. But I have you at a disadvantage, as my next book is on the invasion of Denmark and Norway. A quote from my chapter 8:

Iceland was also Danish and would be occupied by British troops on 10 May 1940. They wanted to prevent any German action against Iceland and immediately occupied all communications facilities. The United States took over occupation of Iceland in July 1941.

That is when your marines moved in so the Brits could go fight elsewhere.

And where did the Brits go? To North Africa to fight Rommel.

BTW, I have some little-known information on the Norweigian resistance during World War II, but unfortunately I cannot say much, because it involved Norweigian underground people killing Quislings, and the children of those killed are still alive and resentful in some cases. I've had the good fortune to listen to people who know things that never have been (and probably never will be) written in books.

I'll bet lots of unwritten stories of WWII exist. The step-dad of a good friend has such a story. The step-dad is of German extraction and was sent to a German internment camp on one of the Aleutian Islands. According to him, the inmates had to more-or-less fend for themselves and most died. Never read about these camps in any historical account. Took many years for this guy to even be able to tell the story.
Was that the concentration camp we set up for the native Alaskans in WWII (to protect them from the Japanese)? A lot of people died in those. Natives had low resistance to crowd diseases. We didn't send them to safety in America for some reason, probably racial.
What was a German doing there?
Very good question. Many German prisoners of war were interned in midwestern U.S. where they (voluntarily) worked on farms and were not seen as bad guys, because everybody knew they had been drafted. Some became involved with American women (not surprising, since so many U.S. men were overseas), married them after the War became good citizens of the U.S., often successful in business.
[sniff] you're killing me, Don.
I wish you would write more stuff like this. You have a mastery of history and detail. I wish you would grace us with that knowledge more often. It's not that I don't enjoy your other stuff, it's just that discussion of philosophy and aerobic sex pales in comparison to that of Hitler's march toward Baku.
So exploration is in end game. More money will be spent and will be mostly unproductive. Existing fields will be produced more and more intensively and the cost for production will rise on a per barrel basis. Prices will continue high because of expected reduced supply someday and demand will flatten or fall as the marginal user of oil is forced out of the market. New marginal suppliers will show up using really high cost sources of supply such as heavy oil and oil sands. The real new energy will be from nuclear sources and will be based on long term sustainable breeder reactor technology. The new battery technology under development will allow electric or electric hybrid vehicles to replace oil only transport. All will end well with transport only being a slightly larger component of measured GDP. Hope we don't go to war to secure the last pools of cheap oil. They will come to market with the right price. Security issues should be handled by government paying to increase stockpiles and emergency supplies. Looking for the last undiscovered oil accumulations will be interesting.
In relation to fast breeder technology: what does 'long-term' and 'sustainable' mean?
I think it means that the uranium and thorium in the Earth crust and seas are enough to meet all energy requirements of mankind  for the next several million years. Will give us some time to cover Sahara with solar panels I think.
That would be nice....

In my darker hours I sometimes wonder, if peak oil is here and we start using a lot more nuclear power, how long we have until "peak uranium".

Using current technology and mining currently identified reserves uranium will be enough to provide all energy needed by mankind for 500 years, assuming breaders.

To make it harder let's assume we have a 1% demand growth (no conservation etc., business as usual). This will drop the years to 180, and the half of the uranium will be mined after 126 year.

All of this of course is BS, the uranium resources are thousand times huger than that (0.0003% of the earth's crust, 700 times more than gold, 5 times as much as copper). Actually they mostly depend on our will to mine for them. It is estimated that a ten-fold increase of the uranium price increases the economically accessible uranium reserves 300 times. Plus there is also thorium which is 3 times as abundant as uranium.

In general don't worry about it running out, the limts on its use are all above ground.

The next hundred years, because we are increasing our energy demand. OK, the next two hundred years.
There is a post with graphs at Powerswitch
that give more information, from the OGJ from Feb 20th.
Thanks for posting the link HO.
That Powerswitch link is definitely recommended reading although it's a pity there's a javascript error on the page that doesn't allow enlarging the images.
Through scouting, IHS has become aware of 300 so-called "elephant prospects" that have combined recoverable volumes of 107 billion boe. Of these, 75% are oil prone. Potential at each is 250 MMboe or more.

The prospects are in 71 countries and under the control of 91 operators. They are 58% in Tertiary plays and 22% in Cretaceous plays.

Industry's success rate in 2005 was 6%, or 10 successes of 250 MMboe or greater out of 140 elephant prospects identified.

Notice historically how the term "elephant prospect" has changed. From the EIA's 2003 Performance Profiles of Major Energy Companies
Apparently, potential investing firms believe that Libya's transformation away from that of being a rogue state is genuine and irreversible. With respect to the resource numbers, the investing firms apparently believe that the most recent USGS resource estimates (8.3 billion barrels of undiscovered oil and 21 tcf of undiscovered natural gas) are overly conservative. They argue that Libya is underexplored, but exploration has yielded 12 oil fields with reserves of greater than one billion barrels,[bb] the very type of "elephant" fields that major oil companies need for growth. Both of these beliefs are about to be tested during the next decade.
So, it was 1 Gb in 2003 and now it's 0.25 Gb in 2006. My, my, how times change.
Boy - the state of the art in genetic engineering is clearly gone way past what I realized. Elephants the size of mice - whatever next?
I have a general question: Is it ok, to talk about investments on this blog?  I know that there are many investors here, and it has been suggested that investors of the level of "market movers" are regular readers.  I have noticed that there is little investment talk (which says a lot about the unwritten rules), but there are futures prices and ads for investment services.  On the down side, including investment talk would most likely decrease the time until this blog becomes saturated with comments.  Just so you know, I am a small level stock and options trader (buying LEAPs only) - futures and futures options make my already high stress levels move into the danger zone...
The subject has come up from time to time - there is no reason not to discuss it.
Stuart's comment is, as usual, solid.

I would add that it makes sense that oil will become more valuable in the out years, and so investing in safe oil (like in Canada) is a good bet. The tipping point is when people realize that what we are doing is making polar bears an endangered species and Olympic Winter Games problematic.

A question I've had for a while is, how much is the oil and gas industry spending globally on E&P a year? What is the hunt costing?  That would include investor-owned and state outfits.

My guess is about $250 billion but I don't have a clue as to where I came up with that number.

With good data series for E&P and for BOEs discovered, one could plot the cost of production per BOE over time.

Bet it's going up steeply.

Bet it's going up steeply.

It's not.  There have been several articles in the fiancial press about how Big Oil doesn't know what to do with all the cash that's pouring in.  

Most of the articles blame fear that oil will drop in price, but some, like this one, also note that there's really nowhere left to drill.  So Big Oil ends up "drilling on Wall St." - buying up smaller companies to get access to their reserves.

There is only so much drilling on Wall Street left to do
and then that 'province' will be pretty well explored.
The Share buy backs basically indicate that they have done all they (IOC's)can do and here is the cash back to invest elsewhere. It is a shame. Of all the companies with huge amounts of capital required for any new build Nukes, the major IOC's have the most. UK starts impoprting oil this year and for every year thereafter. Cash that could have been used in Nuke building and serious alternative energies will bleed out from Britain and not be available for this purpose as the balance of payments go into the red.
We have a nice litmus test coming up: In six years time London hosts the Olympic Games (assuming we can all afford the Air fares)
Oops, sorry.  I misread your post.  Missed the entire 3rd paragraph, which changes the meaning quite a bit.  :)
I'm going to risk a prediction. I'm saying much more than I know (again) with full confidence I'll get corrected. The presumption behind these predictions is that the administration will do everything it can to avoid fundamental change in our (US) economy and way of life - no matter what the implications are down the road. (Growing impoverishment at the bottom and middle is not a fundamental change -- up to a point.)

1. Of course, the military and geopolitical campaign to control as much as possible of remaining reserves remains key and can only intensify, otherwise collapse comes earlier rather than later.

2. Coal to liquids. This is their best shot at keeping the transportation system going as is. The tar sands, shale and other stuff is harder. The tranportation system is key - the military, the entire economy as presently structured deeply dependent on it. Prices will force the poor and not-so-poor into car pooling.

3. Coal and nuclear for electricity, leaving more of the gas for home heating, industrial, etc. Coal is what there is -- nuclear they'd love to revive.

4. Gas for home heating. Home heating is NOT crucial to the economy -- especially if poor people get cold. And even the middle class can move to heating one room and wearing jackets in the house.  Price again will take care of all this.

I know there are gas-to-liquid projects, but the market for gas unliquified can take all that's produced.

The Germans, when confronted with the same problem for a different reason, oil shortage, went for coal-to-liquids. Our guys have used their (the Germans') playbook in a lot of other areas. Why re-invent the wheel?

I'm not saying there won't be all kinds of efforts at the state and local level that are reasonable and run against this. There will also be all kinds of experiments with solar, wind, biofuels, etc. But I'm simply guessing at what will be the main directions set at the top.

Not listed is the greater role of the military at home needed to handle the impoverished - terrorists all.

I would finally add that because we are so wasteful, so extravagant, there is an enormous amount of elasticity on the down-side -- that is opportunity to reduce consumption -- while raising prices to maintain or increase profitability of key industries. All that will happen is that the already skewed class structure will bring us closer still to second or third world status, except that we will have an immense inherited infrastructure from better days. Of course, once that infrastructure crumbles beyond a certain point, then it's over.

Re the Germans and coal to liquids. The process made sense
in Germany when you needed fuel for Panzers at ANY cost.
Also, one of the energy inputs was virtually free: Slave labour.
If there's one thing the world has plenty of, it's lots of cheap labor.

And probably a lot more of it in the future.

"[T]he already skewed class structure will bring us closer still to second or third world status, except that we will have an immense inherited infrastructure from better days. Of course, once that infrastructure crumbles beyond a certain point, then it's over."

Which is Richard Duncan's Olduvai Theory in a nutshell.

Re: "Overall I would say we are all losers"

Thanks for the post, Bubba. I hope you don't mind me telling folks that it extends my story The End of Exploration? from a while back. So, I can't say I didn't expect this bad news. The mitigation time for preparing for peak oil as in the Hirsch report is rapidly approaching zero. We are all losers here.

Any one year's discoveries tell us about future production N years out. I know it depends on a number of complex factors, but what would you say the average for N is in the current era?

Your 2005 Exploration Round-up is for "publicly traded companies" only?  What about State Owned Enterprises or Privately Held Companies?
There is a mix of information here.  The $15 billion is an estimate of how much publicly-held companies spent - because that information gets reported.  The discovery numbers are everything that is known including NOC's (ONGC for example) and privately held companies (none of which are really players on a global scale that I can think of).
The elephant in the room, which you aren't commenting on, is the lack of discoveries in Saudi Arabia, Iraq, Iran and Russia. Where are all the stories about the majors drilling those countries and coming up empty?? Yes, the majors are having trouble in the little circumscribed sandboxes to which they are confined, but that doesn't prove that the area outside those sandboxes is all played out. It's in the financial interest of the NOCs to loaf and restrain supply. That's why they have a cartel.
Saudi, at least, is spending billions to try to boost production from old, sour fields using the most expensive technologies available. If they thought they had much to find in the way of the older style highly productive and cheaply produced fields like they used to have, I don't think they'd be spending all that on fields with much poorer return and tremendous, expensive technological challenges. Their financial interest is to pump the cheapest oil and sell it for the most. At this point I cannot believe their lack of new discoveries is due to "loafing." They're trying to hire all the oil workers and rigs on the planet, from what I've read on TOD and elsewhere.
The number of rigs Saudi is using to look for oil (as opposed to gas, which is in short supply to run their desalination plants) is tripling this year. The 64m barrel question is whether this is to compensate for increasing declines from existing fields or (as they say) to increase output.
"From 1995 to 2004, fewer than 30 new wildcat [exploration] wells were drilled in Saudi Arabia, compared with more than 15,700 in the United States."

That sounds like loafing to me.

I don't know how acurate Maugeri is in his account. He gives a lot more opinion than data in his article. Comparing the vastness and complexity of US (incl Alaska and GOM) with a nation like Saudi Arabia is apples and oranges anyway. There are several reasons why wildcats are or are not drilled. One is the presence or absence of good unexplored prospects. Simmons would state that Saudi Arabia is well mapped seismically, and it has been explored for decades. I still cannot believe they would spend so many billions for developing challenging, questionably rewarding prospects if they thought they had good prospects for a new field that could be developed more easily and cheaply. I could accept your argument if this wasn't the case, especially given the premium for light crude and Saudi's economic needs right now. We can agree to disagree, and time will reveal the truth.

I don't think we can rely somehow on oil that no one even knows if it's there or not. Many seem to take the position that any place unexplored must be full of oil and we just need to drill. I think this is a risky assumption to say the least.


If your inference is that if you allowed the IOC's into Saudi Arabia, and Iran (forget Iraq for the moment - they are a disaster) the IOC's would be able to increase production in those countries, I am almost certainly in agreement with you.  On the other hand, the IOC's are already heavlily in Russia (Sakhalin I, II, III; BP-TNK; ConocoPhillips-Lukoil).  Furthermore, within the industry Saudi Aramco is considered one of the best National Oil Companies and very competent.  Moreover, the political reality is that no other company is going to get in there to explore for oil (gas - yes).

If you are arguing that possible peaking of production is a man made event and not a function of geology I will partially agree with you.  However, oil production, period, only makes sense in the context of human habitation of the planet.  It is irrelevant otherwise.

In the end, however, there is only so much oil in the ground, and we are using it up awfully fast.

Interesting. You identified the precise point I was trying to make, although I thought I'd have to work a lot harder to get anyone to concede it. ;-)
Your point is well-taken too. I think it's best to leave as much oil as possible in the ground, for later.  The NOCs are doing a good job of that, and they should be supported. High prices are a good thing. I wish the U.S. would pass a solid gas tax though, so they could get some of the money (for rail etc.)
What, no pie graphs and charts this time? :P
What's the bottom line, then?

We are using about 85mbd all liquids each day. What are the discoveries adding up to?

We used about 30gb and discovered 4.5gb
About "well depths greater than 30,000 feet."  Wasn't there something in the abiotic oil debunking arguments that that's getting close to the point that oil would be broken down into methane?  So 1) are those natural gas fields only / 2) is it not quite deep enough / 3) was the abiotic-debunking point not firm?
That depends where you are, and what water depth you are in, what geothermal gradient exists, what type of organic source rock you have (oil prone or gas prone), how long the sediments have been buried, etc.  In the GOM Paleogene, the water depth is 9000 ft or greater, the source rock is oil prone, the geothermal gradient is sufficiently cool and the burial time has been short enough such that the oil is still the primary in-ground form of hydrocarbon.  In other parts of the world, 30,000 ft is too deep for anything to be left. All hydrocarbons would be completely coked.  Also the 30,000 ft is the total drill string length - even if the first 10,000 ft is just water.
Uh? Only 4.5 bbo? I thought the IOC's promised us that new technology was going to find us much more!
You've got to be more specific here. Frame your question. We will answer it.
Ultimately they (or more likely the national producers like Saudi Aramco) can fall back on the technology of pen and paper, or its modern equivalents. I said earlier in this thread with my tongue very much in my cheek:

I'm sure that reserve "revisions" will easily fill the shortfall in discoveries, on paper at least, for a couple more years anyhow. After all, there are still perhaps 1,000 Gb, maybe more, of reserves still in the ground, it would only take an annual 2.5% upwards "revision" to solve the discovery shortfall.

Perhaps they will have to start looking for abiotic oil soon ;)

Or the IOCs could recruit vast numbers of economists to explore for oil since the geologists are doing such a poor job of it ;-))