Is a Wall of Oil Heading for the Market?
Posted by Prof. Goose on August 10, 2006 - 5:12pm
[editor's note, by Super G] This is a guest post by Cry Wolf.
Those few of you who may have read some of my earlier posts will know that I like technical analysis, but prefer to look at the technical position in conjunction with what is going on in the real world. In particular, Stuart's excellent plateau posts provide a short-term view of world oil production struggling to rise above 85 million bpd.
What has concerned me was the knowledge that a number of large new oil fields are due on stream during 2006 (and beyond) and I was left wondering how many of those were already on production, and would be included in EIA, IEA data and therefore included in Stuart's charts? And how many have yet to come on stream later this year? Was it possible that a wall of new oil was heading for the market that would see production rising towards 86 or 87 million bpd?
Chris Skrebowski's megaprojects database (pdf warning) formed the basis of this research. I have basically trawled company web sites and the internet for status reports on the 29 new 50,000 bpd+ projects that were due on during 2006.
The results fall into three categories:
- Projects with recent data reporting that they are on stream
- Projects with recent data indicating that they will be on stream by the end of 2006
- Projects with no recent or confident data whose status is unknown. These are mainly ME OPEC projects.
So here's the results (the numbering system is from my spreadsheet which is available on request at the email at the bottom of this post):
Projects that are on production with indicated max flow rates
1 AOR-E delta, 110,000 bpd new production capacity came on July 067 Erha, 150,000 bpd, March 06
9 In Amenas, 50,000 bpd, May 06
13 Azeri-Chirag, 300,000 bpd, June 06
14 Albacore Leste, 180,000 bpd, June 06
16 Benguela Belize, 110,000 bpd, July 06
19 Chinguetti, 75,000 bpd, Feb 06
21 Enfield, 100,000 bpd, July 06
23 Golfinho, 100,000 bpd, June 06
26 Syncrude ph3, 100,000 bpd, May 06
29 Upper Salym, 60,000 bpd, June 06
30 Yoho, 160,000 bpd, Feb 06*
12 projects: 1,485,000 bpd new capacity already introduced
* not on the "Megaprojects" list.
Projects not on production yet but with reported probability that production will start 2006
15 Atlantis, 150,000 bpd, end 0617 Buzzard, 100,000 bpd, late 06
20 Dalia, 240,000 bpd, no recent news
22 Foster Creek, 115,000 bpd, SAGD tar sand
24 Jubarte, 60,000 bpd, 2H 06
25 Surmont, 100,000 bpd, SAGD tar sand
28 Thunderhorse, 250,000 bpd, ¾ 06
7 projects: 1,015,000 bpd new capacity going to come on
Projects with uncertain status
2 Asab upgrading, 100,000 bpd3 Bu Hasa, 180,000 bpd
4 Darquain, 105,000 bpd
5 Dolphin, 100,000 bpd
6 EA, 50,000 bpd
8 Ghawar Haradh, 300,000 bpd
10 NEB, 100,000 bpd
11 South Pars 6 & 8, 120,000 bpd
12 South Pars 9 & 10, 250,000 bpd
27 Tengiz, 150,000 bpd
10 projects: 1,455,000 bpd that may or may not be already on production
Note that Cachalote in Brazil is on the Megaprojects list but I can find no reference to it being an actual project for 2006. This is replaced by a large Nigerian Field, Yoho, that is not on the Megaprojects list but which came on in February this year.
Looking at the fields with confident reported data, 12 are on production representing 1,485,000 bpd new production capacity whilst 7 fields are still expected on stream by the end of the year representing 1,015,000 bpd new production capacity. This is split exactly 7:5 indicating that new production has come on stream proportionally throughout the year and is neither biased towards the beginning or the end. It therefore seems reasonable to assume that 2006 production from the 10 projects with no data may be distributed similarly (although some of those such as South Pars 6&8 have been delayed to next year).
The main conclusion to draw from this is that capacity erosion has been balanced by new capacity for the first 5 months reported on Stuart's most recent plateau chart. Equally, it is worth noting that 7 of the projects already on, came on stream during June and July and are not yet included in Stuart's data, these are, however, included in the current oil price. It would not surprise me if we see June and July production creeping up, to be knocked back in August by supply disruption at Prudhoe Bay.
There does not seem to be a wall of new oil heading for the market that would substantially alter the emerging production plateau. The main areas of new production are the Caspian, Angola, Brazil and the US GOM. The Tbilisi-Baku-Ceyhan pipeline opened on June 4th and since then 8 consignments of oil from the Azeri-Chirag fields have been lifted at Ceyhan (just up the Med. form Lebanon) representing an average 120,000 bpd. This is projected to build to 1 million bpd over the next three years.
Note that all production data are for maximum capacity that will not yet have been reached in most cases. Production from those fields will build in the months ahead - just as production from fields brought on last year will have been building during the first half of this year.
I have a spreadsheet summarising all this data with links to sources. If you want a copy then mail me at:
euan dot mearns at btinternet dot com
aka Cry Wolf
Contact
- Content: editors at theoildrum dot com
- Tech support: support at theoildrum dot com
License
This work is licensed under a Creative Commons Attribution-Share Alike 3.0 United States License.
Was this latest "Terrorist Alert/Airline Passenger crackdown" a response to the the Prudhoe shutdown? An overt attempt at rapid demand destruction? Subject the passengers to ridiculous conditions, and people will stop flying, airlines will cut schedules, just in time for the Prudhoe "Oil Cut."
Good point. It looks much like hysteria-pumping excercise aimed exactly at demand destruction. However, Prudhoe may not be the primary reason - there must be something bigger. If this theory is right, the UK and US governments will use this "failed terrorist plot" as an excuse for some vile atrocities (a war against Duka-Dukastan?)
to me yesterday's madness in the UK reminds of George Orwell's 1984 (see last sentence of the quote):
""Winston found that the one area of his interest in which Julia could not share was the idea of organized rebellion against the Party. She was not affected by the story of Jones, Aaronson and Rutherford. She did not mind as he did about the fact that history was being falsified daily. As for Goldstein and the Brotherhood, she went to sleep when Winston tried to discuss them. It did not matter to her whether they were fighting Eurasia or Eastasia, in fact she doubted whether there was a war at all, the Party probably dropped the bombs itself to control the people.""
- "Leverage the xenophobia" as the pentagon said in its internal documents re: Zarqawi. As the dictator screamed in the movie V, "REMIND THE PEOPLE WHY THEY NEED US!!!
- Get Lamont defeats Lieberman out of the news cycle
- Get dead Lebanese children out of the news cycle
- build momentum towards UK ID cards
- Get people accustomed to martial law
..
.
Maybe oil demand destruction is a peripheral motive also
Where can I send my application for this position?
==AC
I think it it tragic to see this list degenerate into a posting place for conspiracy theory nitwits.
Given that, it doesn't seem like much of a stretch to see other factors affect the timing of press releases. And at least this is a peak oil related theory.
But I agree that it would be nice if The Oil Drum didn't go to far down this road.
Hey, Capone said "Once is happenstance, twice is coincidence, three times is enemy action", but that doesn't mean he was right. Sometimes things just happen.
"The man who never alters his opinion is like standing water, and breeds reptiles of the mind."
~William Blake
==AC
For that, you would need to educate people to actually get informed and think and not just swallow headlines whole.
--
¡Think, organize, and fight!
But if you cannot think... ¡Organize and fight!
But if you cannot organize... ¡Fight!
-- Anarchist slogan
That's mayhem, not anarchy.
Sorry. I have anarchic moments. But the default state is not one of violence.
Seriously, see if you can help convince your anarchic brethren to use the alternate algorithm below:
while (! $goodEnoughSituation)
{
if ($Brain->thinking){
return createConstructiveSolution($Brain,$Community);
} else{
start($Brain);
}
}
Here's another take on how (not) to form governments:
"Meanwhile, a constitutional crisis. Prime Minister Nuri al-Maliki had announced that he was stripping the provincial governing council of Basra of its security portfolio. Security is collapsing in the southern port city, oil exports through which account for the only income the Iraqi government has. The governing council has declared that it will not relinquish the security portfolio.
The stage is set for a contest between the central government's armed forces, including the 10th Division of the army, and the Shiite militias that support the provincial government." - Juan Cole
For those that can translate:
http://www.azzaman.com/azzaman/http/display.asp?fname=/azzaman/articles/2006/08/08-09/999.htm
voices overheard :-)
Lebanon not going to good in the Media, What can we do to saturate the news with? I want a 24/7 wall to wall MSM event. What do we have on the burner?
Well we got a group planning to blow up an airline.
We'll go with that.
A little dark humor this morning.
I watched "V is for Venditta" last night.
I would HIGHLY recommend it.
JC
No. It happened now because they intercepted a message from Pakistan basically saying "Go do it now".
I would like to know why "months" had passed before action was taken. Why was the 1% rule ignored? Why was action delayed until the 11th hour?
Feel free to elaborate. I hope the answers you find are to your liking.
I don't think that this is any different than any other type of op where you really want to get the maximun amount of intel before shutting it down. Maybe the Brits don't prescribe to Cheneyism's (hope not).
My sources have informed me that al Qaida has planned a "massive gas attack" intended to circumvent airport security.
Before taking to the skys the Jihadis gorge on refried beans at Taco Bell. They board their flights wearing wool. Once in the air, they commence with "death by flatus". Then they rub against each other and create a few static sparks. You get the picture.
Once word gets out, all passengers will have to travel nude and have a high-colonic before boarding.
http://canada.theoildrum.com/
They seem to be in need of being "spoonfed" information.
I can just see Wolf Blitzer talking about it on "The Situation Room"!
I have a plane to catch, assuming they let me on. I'm out of here and I'll see you on the 21st.
One correction. It looks like Thunder Horse will be delayed until 2007. With all of BP's problems they may not be able to get going till 08.
"BP also announced a further delay at its Thunder Horse platform in the U.S. Gulf of Mexico - one of the company's largest new projects - after workers discovered leaks.
Subject to weather, BP now hopes the platform will start up in early 2007. The company said last month it was aiming for a startup in the second half of 2006, while the platform was originally planned to come on stream in 2005."
http://money.cnn.com/2006/07/25/news/international/bc.energy.bp.results.reut/index.htm?section=money _latest
Any news on Atlantis?
---
BP's 58,700 Metric Tonne semisubmersible Atlantis platform has set sail for its permanent location in the deepwater Gulf of Mexico. Designed to process 200,000 barrels of oil and 180 million cubic feet of gas per day, Atlantis will be the deepest moored floating production facility in the world in 7,074 ft of water.
Atlantis Field
Discovered in 1998, the Atlantis Field development is designed to utilize the deepest moored semi submersible platform in the world. The water depth at the semi (PQ) location is 7,074 ft (2,156 m). It is designed to process 200,000 b/d and 180 mmcf/d. First oil is expected in 2007. Oil and gas will be transported to existing shelf and onshore interconnections via the Mardi Gras Transportation System.
BP operates the development (56% interest), with co-venturer BHP Billiton owning the balance.
Field will be developed via semi-submersible Production / Quarters facility, supported by a network of wet-tree subsea wells.
Development drilling and well completions will be conducted using a long-term development Unit (LTDU), the Global Santa Fe Development Driller 2.
Export is via separately funded and approved Mardi Gras export pipelines.
Project is in the execution phase currently, with the hull having been built in Okpo, Korea, and the topsides modules being built in Morgan City, Louisiana. The integration of the hull and topsides will occur in Ingleside, Texas.
BP in the Deepwater Gulf of Mexico
BP began deepwater Gulf of Mexico operations in the mid 1980s. BP produces in excess of 350,000 boe/d (barrels of oil equivalent per day) from nearly two dozen fields, including BP operated facilities at Na Kika, Pompano, Marlin, Horn Mountain, Mad Dog and Holstein. BP also operates a number of subsea tie-backs in the Gulf.
Execution of our exploration strategy has delivered excellent results, yielding a strong portfolio of large, high quality development projects. Focused exploration will continue across our portfolio.
BP undertook an unprecedented simultaneous development of five major projects in the Gulf of Mexico. Two have been completed. The remaining three -- Thunder Horse, Atlantis and the pipelines within the Mardi Gras Transportation System -- will be complete in 2007.
For more information please visit: http://www.bp.com/US
http://www.rigzone.com/news/article.asp?a_id=35014
So, now here we are, and at least in 2006 so far it seems like all we are getting is this lousy plateau. Not good. The fact that depletion is accelerating (see Saudi and Cantrell) right around the time when we get past where this boost was supposed to occur (2007) seems pretty scary to me. Am I missing something here? Sand and corn gonna save us? Guess we'll find out soon enough.
The other main uncertainty is the status of discovered undeveloped resources on the books of the super majors. Fields discovered 2 decades ago that were considered sub-commercial then and have never been booked.
BP = Big Profits ?
BP = Bomb Power ?
BP = Butt paper ?
BP = Bad pollution ?
BP = _____ ?
Next.
(with the potato being a metaphor for Gaia)
Better Pray?
Beyond Peak
Beyond Prudhoe
I'll just act as kind of a judge. All the words I'm thinking of are way to dirty to print here.
Plus I like BP. If it weren't for BP and all the other oil companies how would we do anything? We'd be living in caves. Entertaining ourselves by drawing pictures on the wall with our own shit on sticks. Just like they used to do. Doesn't that sound like fun?
Now we get to slap a keyboard making witty little two-word whatevers about our drug-dealers.
Uggh.
Carry on. Don't let me ruin your fun. Prof. Goose started it, so it must be OK.
What it comes down to, though, is this: they didn't plan properly and now they're driving us into a brick wall.
I just had to vent, and my anger landed on your post. I really meant what I had to say. It had nothing to do with you. Yours really is the best so far. Because if we really mean it, Begin Pedalling is all we can say.
Be Patient.
Hey, as far as drug dealers go, I like BP too. The station near my house has solar panels atop the island.
You're new here. Stick around. We like people with an advanced sense of humor. You made my day. Thanks again.
1st strategic (Chinese) oil reserve to begin operation
Apparently, they plan to store about 33 million barrels of oil, at least in Phase One.
http://www.chinadaily.com.cn/bizchina/2006-08/10/content_661572.htm
Keep in mind that China plans to fill its SPRs with 1 billion barrels over the next five years - that's more than 500,000 bpd.
http://www.chinadaily.com.cn/bizchina/2006-08/11/content_662595.htm
.
http://news.xinhuanet.com/english/2005-07/01/content_3163800.htm
The largest of the first four sites will have 52 tanks with a combined volume of 5.2 million meters squared. The smallest will only have 16 tanks.
This next article says that the 5.2 million mm volume is actually only 33 million barrels.
http://www.chinadaily.com.cn/english/doc/2005-06/10/content_450449.htm
The following article seems to indicate that they haven't decided on the total reserve volume but that the initial reserve would only provide 35 days of cushion.
http://www.newsgd.com/specials/gd%20two%20sessions%202006/session%20news/200602280015.htm
Also they only dropped 100,000 bpd this year... not 400,000.
An extra 500,000 bpd off the world market for the next five years to fill these tanks would be significant.
5.2 million m^3 = 32.8 million Bbl
Each tank holds 630,000 Bbl
Each tank is 335 Ft in diameter
Assumptions:
All tanks are identical. Not likely, but it's a start.
Tanks are 40 ft high. That's typical here for a variety of technical and ergonomic reasons.
Calculations:
Onlineconversion.com has a convenient interface. According to them:
1 m^3 = 6.289 Bbl.
Checking their math shows:
1 m^3 * ((35.3 Ft^3/m^3 * 7.5 gal/Ft^3) / 42 Bbl/gal) = 6.3 Bbl/m^3
Therefore:
5.2 x 10^6 m^3 * 6.3 Bbl/m^3 = 32.8 x 10^6 Bbl
To calculate tank dimensions, assume a 40 ft height, cylindrical tank.
V_T = 5.2 x 10^6 m^3 * 35.3 Ft^3/m^3 = 184.0 x 10^6 Ft^3
V_t = 184.0 x 10^6 Ft^3 / 52 = 3.53 x 10^6 Ft^3 / tank
A_t = V_t / 40 = 88,250 Ft^2
d = (A_t / π )^0.5 * 2 = 335 Ft
where:
V_T = Total Volume
V_t = Volume per tank
A_t = cross-sectional area per tank
d = diameter
π = 3.1415926535897932384626433832795028841971693
993751058209749445923078164062862089986280348253421170679...
Notes:
The biggest tank that I had personal experience with was a 600,000 Bbl monster in LC. So in precise technical terms, their tanks are pretty darn big.
tank farms for strategic reserves ..
going long a few steel producers
might not be a bad play .....
Triff ..
If I was going to invest in steel mills, I would not look for plate or strip mills, I would look for mills that made materials for coal to liquids plants. Big honking tubes.
Hardman shares have been hammered and Woodisde have been slumping lately too (much to my dismay)...
http://www.smh.com.au/news/business/not-happy-woodside-about-the-revisions/2006/07/20/1153166517999. html?from=rss
And, in my opinion, this drop in gasoline prices bled over to crude oil. That, not the terrorist plot, was the major reason for the over two dollar drop.
I can't really comment too much since I tend to agree with the Saudis that, "current high oil prices do not reflect supply and demand."
I would like to comment on Prudhoe Bay. I think this is a big negative for the American economy more than anything else. As I've made clear before, i'm expecting oil prices to continue to drop. The economy can't take too many more hits at this point. Prudhoe Bay problems mean less income for big US oil majors, worse trade deficits down the line, good news for SA and the other exporters though. Not that Prudhoe Bay is overly important in the big picture. I would keep watching the housing market, treasury inflows, falling stock markets, declining GDP, etc.
How does the BP pipe problems affect them? I thought it was just the side pipes leading to the main pipe (as you can tell, I am not in the industry).
Heathrow is one of the busiest airports in the world and virtually no planes took off from there yesterday (I should know as I spent most of the day there!).
Recession probably avoided because interest rate hikes have stopped, at least thru the election. <6% long term rates are low enough to bring buyers back into real estate. Unemployment did rise, but (officially) is under 5% - move along, nothing to see here. Higher prices and volumes increase the US trade deficit, but higher prices also increase the need for other importers to acquire $ to pay for their own fix, so $ crash unlikely.
The world is getting used to a plateau in oil production, and the associated $1.80/month (100/b mid 2007) price increase. We are paying half what Europeans are paying now - although we do drive more - so payments may be painful but still bearable. It is often said that, in today's dollars, we still pay less than we did a quarter century ago. BUt, we all agree inflation is understated, so we are probably in fact paying far less than then. If, as I think, we get to 100 mid-07, it will still be cheap vs 1982. Just remember how good we (still) have it, how cheap it is to fill up, and press on.
My guess is that nothing much happens until an actual production decline, aspo thinks post 2010. (Freddy loves to point out that aspo now shows peak delayed until 2010, but fails to mention that the aspo curve shows Colin is in pretty good agreement with Stuart's plateau until then.) Imo, delays in major projects look likely to prevent both a production increase in 2007 and a decline in 2008/9.
Still five years to go before looking for the panic button providing, of course, that nothing too interesting happens around the persian gulf.
"Fly Often. Fly Safe. Fly Naked."
Are there others?
Regarding the approaching wall of oil: maybe. I'll believe it when I see it, like a great tsunami of petroleum, bathing us all in its cheap and easy GW fumes as we slowly turn on this giant planetary rotisserie.
"Please pass the catch-up," say the Chinese and the Indians, "We would like our share in this infernal barbeque."
How long will it take us to burn through any wall of oil that might be approaching, again? What will the consequences of burning through such oil be?
And will we decide to sequester the human species in the earth and to just let the GW gasses have the atmosphere and the oceans after all?
Sequestered Suburbia. Now there's another idea in need of advertising slogans. "Ye Olde Mineshaft Condominiums" -- no, that just doesn't pop at all.
2007 - 88.2-mbd
2008 - 91.5-mbd
2009 - 92.2-mbd
2010 - 93.5-mbd
This includes an adjustment of 4.4-mbd for processing gains.
$100/barrel would probably be a record high in 2007.
Everybody here knows what the price of oil is, where it has been, and why. If we didn't, or don't, we would have asked. Thanks for your trouble, but please, we might be just slightly more informed than you apparently thought.
Stick around, you might learn something.
Chart-of-the-Day was the one Steven Colbert was holding(which Dave showed us) with "Peak Oilers" in the middle.
I agree with you that it is not the "Chart of the Day", but I keep a copy of one similiar on my desktop for long term perspective.
I also keep a photo of one of one of my favorite vehicles a Volkswagen Rabbit Diesel Pickup truck, the true model T of an oil crisis age. My father who commuted 20 miles per day to work as a Diesel mechanic for the military switched from an Oldsmobile 98 that got about 10 or 11 miles per gallon, to the Rabbit Pickup, which got 51 or 52 miles per gallon right about at that spike you see in the chart, a 5 FOLD INCREASE IN FUEL MILEAGE (!!!) yeah, it's important to remember where we've been...
"Everybody here knows what the price of oil is, where it has been, and why. If we didn't, or don't, we would have asked.", with all due respect, I beg to differ. I will speak for myself here...I CERTAINLY DO NOT know "why" the price of oil is what it is, and certainly am not at all certain how it got here. If I was, I would have no interest in charts, stats, Ghawar and the rest of what we trade in here. To me, it is still very much an open question. Let me put it this way:
If you had told me in say 1997, and I had accepted that in the next decade:
#There would have been two of the most horrendous hurricane seasons in history back to back strike the Gulf of Mexico
#There would have been a major mass murder terror attack against the United States, Britain, Spain and Russia, all with Saudi Arabian connections
#There would have been the outbreak of a war in Iraq of massive scale, and it would have degraded into a bloodbath and quigmire from which the United States could not extricate ourselves
#That the British North Sea would begin declining in oil/gas production, and the drop would soon be near or at double digit drops per year
#That the story would break that Bergen, the biggest field in Kuwait would peak, and that Kuwaits reserves were in extreme jeopardy
#That a major investment banker in the energy industry would begin giving speeches and presentations and write and sell an involved book that Saudi Arabia is beyond peak, or soon will be, and will begin declining very soon, and possibly much faster than predicted.
#That the Alaska Prudhoe Bay would be pulled off the market due to pipeline corrosion for an unknown length of time.
#That our own Federal Reserve Chairman would go before Congress and warn in very dire terms that the United States faced a possible economic recession due to lack of one precious resource we had always taken for granted, natural gas, and the NPC (National Petroleum Council) in a special report to the Secretary of Energy would pronounce a shortfall on natural gas supply for the foreseeable future.....
o.k., I will call it off, that's enough....my point is, if you had told me that this would be the news in the decade from 1997-2007, I WOULD HAVE BET ALL I HAD AND ALL I COULD BORROW THAT CRUDE OIL WOULD BE EASY OVER $100 A BARREL FOR MONTHS, AND NATURAL GAS WOULD NOT BE ABLE TO HOLD BELOW $20 A MM/BTU IN WINTERS.
I would have also bet that the Untited States and the world economy would be in shambles.
And it may still happen. But, it's running very, very, very late. Given the nature of the news, given the hammer blow after hammer blow the oil and gas sector has taken, given the known interruptions, declines, political issues....something went wrong on the way to the catastrophic wreck.
I became a bit suspicious after 9/11. That should have been MUCH worse for the economy than it was. To pile the Iraq invasion on, madness!, that would wreck us, and give out tax cuts at the same time!!
Then, the hurricanes. The catastrophe long expected, came, at the worst possible time! That must be a blow that will bring us to our knees, at least for a while! Not enough yet though! And right in it all, the MTBE switch, the Ultra Low Sulfer Diesel switch!! Is there a limit to what we will pile on? The North Sea still dropping, surely the crash would come with the announcement of Alaska being pulled off the market....if we are cutting it close (and by now WE MUST BE), then this is IT. The straw that broke the camels back has to be IN THERE SOMEWHERE!
Prices went up, the newspapers, the TV SCREAMED! My local station was talking about $5.00 gasoline in KENTUCKY!! The week went on. Crude oil went to $77 a barrel plus, and then....fell back into it's trading range of the last half year, mid $70's....then, just over $74. (!!!!!!)
Folks, VERDICT TIME. This market may COME UNDONE tomorrow, this economy might do a 1929 and CRASH in a day, but today, let's admit it:
Since the birth of the new century, more has been thrown at it than anyone, ANYONE, could have imagined, more has happened to completely dismantle the oil and gas markets than the WORST PESSIMIST could have dreamed off, this economy, and this energy supply market has been SLAMMED by blow after blow. And despite EVERY DOOMER jumping on the "$100, maybe even $150 a barrel" bandwagon, despite predictions of these rocketing prices by July 4th, despite the sad predictions of people freezing in their home in winter due to lack of natural gas, THIS MARKET HAS DONE WHAT IT HAD TO DO. I read the articles, the books, that say, this energy market is OBVOUSLY not fit for todays world, it is CLEARLY long past it's ability to do the job. I have to be careful not to sneer. Before we take this one apart, let's see what those guys have to replace it. After watching this one for a decade, against every bet weather the storm, against every doubter, take BLOW AFTER BLOW, RUMOR AFTER RUMOR, SLANDER AFTER SLANDER, and still DELIVER THE PRODUCT AT A PRICE LESS THAN PREDICTED BY THOSE DOING THE RUMOR AND SLANDER, anything intended to replace this system HAD BETTER BE DAMM GOOD. I ain't seen the guys proposing it show they can walk the walk.
There must be a limit to what this world energy market and system can take, but I sure don't know what it is. But we know this: The world will keep pouring on the test.
So, with all due respect, you "might be just slightly more informed than you apparently thought.", but I for one am willing to admit it: I don't know how oil is this cheap, and how this market has delivered. It has baffled me, and left me astounded and awed. I have "stuck around" and in some cases "learned something". But, I have to admit, I have learned as much about what I and others don't know as what they think they do.
That alone is a lesson worth the stay. :-)
Roger Conner known to you as ThatsItImout
We obviously have a serious communist infiltration going on right now in this country. What the hell are we going to do? Are you with me or what, brother? Let's git'um.
I'm sick of this online, blog crap. I'm gonna write you an email. But I'm serious. People hate capital letters. Do you know who Martin Peretz is? He used all CAPS to respond to something a reader wrote "to-the-editor" the other day. He got shredded. No mercy. Martin Peretz. They didn't care. They called him a troll. Just cuzza the caps. I'm tellin' ya.
You ever read any P.D.James? Who is this person?
Awww, that's sweet...why are the caps so annoying though....I'm an old man, they are easy for me to see....and I am saying nothing that can be viewed as shouting in them, that would be insulting....I wouldn't do ya' thataway! :-)
But if you can tell me how to get the italics to take to a post on a Mac, I would do that, I like those too....and how to insert pictures in posts, on a Mac mind you....I promise I would keep them clean!
Martin Peretz? If I google him will I come up with anything? I will give it a try....and P.D. James (I've heard of Henry James, and P.G. Wodehouse (isn't that it, you know, Wooster and Jeeves, funny stuff :-)
On writing a book, I like the idea, but I never stay on the same topic long enough....and on not knowing shiit, I live by the words of the great Yogi Berra,
"It ain't what I don't know that keeps getting me in trouble, it's what I know for sure that just plain ain't so..." :-)
Good to hear from you, I enjoyed the banter, and look, no caps! (well, except at the start of sentences and names), I told ya', send me how to do the italics on a Mac.....caps got nothin' on me....:-)
Roger Conner known to you as ThatsItImout (some caps there, o.k., that's my trademark signature though....poetic license and all that....:-)
Her prose is unsurpassed.
Read her books.
Now, you have something big to look forward to.
The next great thing. The first real, post-apocalyptic film since Mad Max and Soylent Green. Hopefully the best "Peak Oil" film since Syriana.
Bear with me, Don. We're almost there.
Her best novels, in my opinion, feature Adam Dalgliesh or Cordelia Grey. Both are fascinating characters.
Nobody, but nobody can do descriptions better than P.D. James; you could do a fabulous tour of Britain just by visiting the places she brings to life with words.
The BBC TV series based on P.D. James novels are excellent, among the best crime dramas (or any kind of dramas) they have ever done. Available now, I think, both on videotape and DVD.
Human societies, as Joseph Tainter is fond of reminding us, are fundamentally problem-solving organizations.
It often seems to me that pessimists, whether peak oilers or Y2Kers of yore, substantially underestimate the degree to which 'the system' is forced to handle challenges, stresses, strains every day of its life. And so, in order to thrive, it has acquired redundancy and robustness and, dare I say, subtlety and cleverness.
Many pessimists do not respect the fantastic subtlety and complexity of what they criticize. They treat society as though it were a machine that was designed (and is about to break down because of design flaws) when in actual fact it is more like a life-form that evolved and adapted.
Not immortal, of course.
The system is a complex, dynamic, living system that learns and evolves as it is challenged.
And the system includes complex, dynamic organizations - governments and instittions - that are in more or less alignment with the real system - reality. Though I would not presume to know reality in a concrete, conceptual manner I have a deep sense - based on a wide range of data and information - that the human systems (our organization and institutions) are substantially altering the geobiochemical systems upon which the whole community of life depends.
It's a big experiment in the self-regulation and self-governing of complex, adapative, living systems.
Given the clarity, kindness and intention of our political, corporate, cultural and social leadership I wonder if our current large man-made organizations are up to the task of dealing with complex and abrupt changes.
Yet the internet provides a unqique opportunity for global leadership to emerge at local, regional and trans-national scales. This forum is a wonderful pietri dish for evolution.
After Volcker the Fed made low inflation it's primary goal and raised interest rates to 18% to stop the economy cold and "wring out" inflation. It succeeded at the cost of a deep recession and the ruination of Carter's presidency and long-term reputation.
The rise of oil prices was one of the causes of inflation, but only one of them.
Two pseudo-icons' pseudo-theories are in stellar-conjunction, so we should take note? WTF is this? "Pretty Good Agreement"? Is this some term I missed in Eco 101?
Could you point out why this is relevent to anything we discuss here? Please.
"Stuart's plateau"? Now it has a name? Stuart's plateau is a JPEG image behind his chart. Even he will acknowledge this.
Stuart also continues a discussion/debate/conversation with Freddy. He doesn't dismiss him.
Why are you talking about Freddy in the first place? Why not concentrate your fire on Yergin or Lynch? Maybe Freddy is a tougher opponent? You attack him because you can? What?
Freddy has never run and he is still here because none of you have beat him. I've been watching this for 10 months. When I first started here I used to like to beat up on Freddy, too. Every guy who walks in the door likes to beat up on Freddy. Y'know what else I've seen? A lot of people who thought we were going to be overwhelmed by hurricanes this year. Well?...I'm waiting. Think about that.
The other thing I've seen is that through thick and thin, with a few minor lapses, but nothing to write home about, Freddy has always remained a true gentleman - something that almost none of his detractors can claim.
Say what you want. I like people that actually look at the numbers. Freddy is one of us.
An open opponent, unlike some.
But, speaking of Freddy and cera...
As far as I can see, Freddy posts everybody else's predictions, never his own - how is it possible to beat him? He routinely pokes at colin's past misses. While agreeing that cera should change some specific country projections, he speaks of cera as having the best track record. But, cera in 01 predicted ng prices would crash, and in 03 guessed that 06 oil prices would be a little lower than 75/b. What did cera say, in mid-2004, we would be producing in mid-06? Freddy does not mention these misses, so I do not see him as an unbiased observor.
In my view, Colin has done more work for po than anybody on this site. I hardly agree with his socialist solutions, but he has toiled tirelessly, and for decades, to bring the world to an understanding that the sooner we change our ways, the less pain we will suffer. Freddy makes it sound as if his pokes are all in good fun, but few like to be continuously criticized, and I suspect Colin does not, either - he does not publish his past too-early predictions, and why should he?
Colin's past misses are, I guess, in large part because of deep and ultra-deep water successes, so score one for technology. But technology has its down side - large fields will crash much faster than in the good old days, when secondary came after primary. We would all be better off if high tech was (much) slower to develop. imo, westexas/simmons might be pretty close guessing coming major field declines, and aspo might be a little optimistic (thrice burned, etc).
I came to this site as an investor. Colin has been premature regarding the peak itself, but the po prediction quadrupled my ira in 05. Sure glad I wasn't investing based on cera's predictions - my golden years would be pretty leaden. Just imagine, for a moment, shorting ng and oil over the past five years.
- Approximately how long from going online will these new sites reach maximum production?
- What is the estimated lifespan and capacity for these new sites?
- What quality is the oil at these sites?
- How expensive were these projects to bring online?
More important for long-term implications:- While this data is brilliant, we need to see it mapped against current and projected depletion rates for existing fields in order to see if we have a net gain or loss with this production;
- What other projects are planned to come online within the next five years? What is their current+projected cost and again, let's map that against the other data.
If we can piece these items together it will show very clearly what extra forces the price of oil will be up against in the next five years. We can draw a lot of inferences from such a comparison, such as potential bottlenecks, the quality of the oil that will be pumped, the cost to extract that oil, etc.- How long ... This varies from project to project. It is often the case now with deep water fields produced through floaters that most production wells are drilled before the FPSO gets on station. So once everything is linked up the field may get up to plateau in a matter of months.
- Lifespan ... The ACG fields in Azerbaijan are Giant / Super Giant status and will be in operation for decades. The big deep water fields off Angola, Brazil and the US will have a much shorter life - I'd guess 10 to 15 years. Much of this time will be spent on decline.
- Oil quality .. don't know but I'd guess most are light sweet.
- Cost ... very expensive. Angola, Brazil and US Gulf coast are all deep water, hostile environments. You just need to recall what Thunderhorse looked like after Dennis to get a feel for costs. bp and partners had to build a pretty long pipe to get the oil from Caspian to Mediterranean via a politically safe route - Azerbaijan - Georgia - Turkey!
I think it is quite straight forward to model this production data in a more realistic volume v time framework which I'll do and pass on to Kehbab and Stuart to play with as they see fit.Re: There does not seem to be a wall of new oil heading for the market that would substantially alter the emerging production plateau
I agree. In fact, not a plateau at all if I read things correctly. I expect things to get worse before they get better, if they ever do.
The opportunity exists, however, to do this kind of simple analysis because the Megaprojects database (Skrebowski) and the CERA database (Yergin, et. al) actually exist and new projects can be followed more accurately than before. Data transparency is slowly becoming the norm since everything now depends on it.
== Dave
Y'know, these are the type of thoughts that come to me in dreams, and I'm never sure whether they are real or just the opposite. Regardless of my state of consciousness.
Isn't there the equal possibility that since everything depends on it, things will tend toward the less transparent? I can completely go to the darkside. In a heartbeat. Cherenkov's recent referral to "The Dark Side" came from me. He forgets.
I get scared when I see you this optimistic about something - especially something like transparency. And I mean no disrespect by that. I use certain people as paranoia-meters. Why so positive? Error - does not compute!
Cheers, my friend.
Re: does not compute
I take your point.
-- Dave
"Come to the Dark Side - we have cookies!"
The more I think about this though I'm left wondering if we are looking at capacity erosion or capacity withheld (Russia and KSA)? Could the plateau = demand flattening owing to demand destruction? Indian consumption, for example, fell last year.
Concerning production capacity withheld, I have not seen any convincing evidence for it yet. Concerning demand flattening, I haven't seen any persuasive evidence for that yet either although some poor countries are being priced out of the market. I haven't looked into what's happening in India but perhaps I should.
Yeah right.
This is an article about world spare capacity and saudi production over the last year
Why are you assuming the online = producing at capacity? Half of those you list only came online in the last couple of months. Surely they aren't ramping up production to capacity in one month.
WRT new projects ramping up in the future this is of course the case, especially with the ACG fields in Caspian. However, you have to assume that new projects that came on last year were ramping up during the first half of this year and this is included in the supply figures - a kind of quid pro quo.
There's an advantage to the powers-that-be in this being obscured: dealing with peak can be delayed.
Amy's 2nd story is the horrendous and under-reported oil spill in Lebanon thanks to Israeli missiles destroying a power plant. Nobody is doing anything to clean it up! It's moving along the coast to Syria and may yet hit Syria - even Turkey and Greece. The official interviewed stated that if there were no war, this spill would alone would be the biggest disaster to ever hit the Mediterraneum.
And then today's LA Times covers China's unprecedented publishing of the vast numbers of protests throughout the country. About what? Land grabs, horrible pollution, undrinkab le water, unbreathable air, and exploited workers. etc. etc. AS the world turns.
==AC
Oil prices fall more than $2 a barrel
http://news.yahoo.com/s/ap/20060810/ap_on_bi_ge/oil_prices
By MADLEN READ, AP Business Writer2 hours, 13 minutes ago
Several explainations occur to me.
I think a very important aspect is that emotions of traders have an impact on price, and not so much the weighting in of rationals like supply & demand concerns. For example a possible UN resolution calling for a cease-fire in Lebanon may affect oil prices, even though this has no direct impact on supply, as it has impact on the stability of the entire ME and thus on possible future oil production.
Further it can be a classic of westexas' assumption that we will see cycles of prices going up and down, but gradualy upward, as oil importers outbid others for net export capacity, destroying some demand, causing the price to drop a bit again, and this over and over. The price is still well over US $ 70.
Oil is a commodity, and commodities go through bull and bear markets. Right now, we are in a longterm bull market for commodities, which will probably last at least another 10 years. We are in a longterm bear market for equities, which began in 2000 and will probably run its course by around 2010. Within the equity bear market, we are about to witness a major collapse, with the Nasdaq reaching 1600 by the end of October. It currently trades around 2060. Two great leading indicators, SMH and QQQ have already collapsed below key support levels and are both down 15-20% over the last few months. The markets will soon follow. So equities are about to experience a pronounced downturn within the context of a bear market. Commodities, on the other hand, are about to experience a pullback within the context of a bull market. In fact, they are already experiencing it. HUI (gold shares) peaked near 400, is currently near 340, and will probably bottom out around 250. OIH (oil shares) peaked around 168, is currently at 140, and will probably bottom out around 110. Commodities themselves have fared better, but this is typical, since the shares tend to lead the commodities lower. Oil, as you know, peaked at $78 and is now at $74. Watch for the following trends in commodities: commodities shares leading commodities lower (this is already happening, the shares have already declined significantly, soon the declines will accelerate, the commodities themselves are poised for collapse), equities and commodities moving down in tandem (contrary to popular belief, equities and commodities, even gold, often collapse together, just look at the Nasdaq collapse of 2000 and 2001, gold experienced even worse declines during this period, in other words, commodities are no safe haven during an equity collapse), huge amounts of money flowing into treasuries (keep an eye on TLT, as bond prices rise and money continues to flow into treasuries, remember, the treasury market is 5 times larger than the equity market, money will flow out of equities and commodities). Also, keep in mind that more people have poured their money into metals and energies mutual funds in the past 2 or 3 years than in the previous 20 combined. Commodities mutual funds and hedge funds currently play a historically disproportionate role in the the pricing of the underlying commodities. Expect abrupt movements. These people tend to make moves in mass.
None of this has anything to do with peak oil, of course, and as WestTexas pointed out, the stock market is a side issue. This is absolutely true and I agree with him 100%. I'm just trying to give an explanation of why I think oil and other commodities will fall in the coming months.
Thanks for your input. Can you offer a "rough" estimate of how far we can expect to see oil fall in he coming months?
==AC
==AC
I agree with that statement also. I just find "news" does move the price of oil, like PaulusP said about the "emotions of traders", and it is odd which news moves it. I notice that oil will sometimes move up more with general bad news than with news that directly effects supply. For example news of Israel attacking Lebanon may tack $3-$4 on the price of crude and a shut down of a major oil field and the loss of production in Nigeria take a few $s off. It's an odd conundrum...
==AC
==AC
I've sold my equities, I'm ahead of the curve there
Mustn't buy gold or silver or oil futures, they are going to tank
Let's not talk about real estate...
Perhaps I should just sit on the cash?
No wait, inflation or currency collapse are just around the corner.
Gee, I'm lucky I haven't got much money. I really wouldn't know what to do with it.
AlistairC,
The odds do seem stacked against us average folk.
Do you mean borrowing something feels really good? Paying an unbelievable inflated 30 year note and in many cases sky-high property taxes is like paying homage to the debt lord...
==AC
AC,
You gotta live somewhere.
Don't get me wrong - if you can pay cash so much the better, but for most of us that's just not reality. I suppose I could have bought a shack in the Maine woods for $30,000, but I still happen to like civilization. Coffee shops, concerts, dating, work....
Real inflation is running at 5-7%. A 30 year fixed mortgage is around 6.5% right now. Most people get around 30% of that back in tax writeoffs making the effective interest rate 4.5%, which is well below inflation.
And what pray tell am I supposed to do about property taxes? Everyone pays those irregardless. Either directly as a home owner, or else they are factored into what you are charged for rent.
The last global deflation occured in 1929 with the Great Depression, when the FED reduced the money supply by 30%. In Germany, chancellor Brüning deflated the currency willingly, mainly because he could not risk inflation after the hyperinflation in 1923, and he wanted to get rid of the reparations Germany had to pay.
Both FDR in the US and Schacht in Germany fixed the deflation remarkably fast, FDR with the New Deal and Schacht with the "Mefo" promissory notes, which could be used to get cash from the central bank.
The deflation in Japan after their real-estate bubble burst was not fixed because unlike FDR, the Japanese government failed to restructure the banks.
I am quite convinced that the FED and ECB will not allow deflation to happen, because that would increase the debts of the governments.
==AC
I can't believe that anyone within or without the business can really "know" that the dispruptions are temporary within the time frame we are talking about. Do they have access to knowledge that the unrest & war in Iraq or Nigeria will soon be over? That the hurricanes won't wreak their havoc again this year or next few years? The best forecasters in the world can't say. It is also possible more disruptions will occur than we have now - who knows?
I do appreciate the frank, straightforward tone of your recent contributions, devoid of personal attacks. It works better that way. If others follow suit, the world of TOD will be a better place.
Until some zone goes soft, the marketplace will continue to sop up every extra barrel; the rest going to new SPR vaults in China and India.
IEA announced an 85.5-mbd extraction rate today for July. And revised June to 84.9-mbd (from 85.2) of which 30.0 (revised up from 29.8) is the OPEC component.
Q3 pricing reflects bulging demand ... not scarcity, and certainly no decline in production.
I know that Haradh has been on line for over a year. Yet Saudi is still in decline. I suspect that many of the other fields are you lis are also on line, and we are either in decline or on the plateau. We are trying to go up a down esculator and we are louising the battle.
Are you saying that Haradh GOSP 3 came on in 2005? It would be pretty significant if the whole of this flagship project was on stream and Saudi capacity was actually falling.
http://www.gulfoilandgas.com/webpro1/MAIN/Mainnews.asp?id=2647
Same URL as above.
With Haradh fully commissioned, South Pars delayed until next year - and maybe beyond, Tengiz delayed unitil next year (email correspondence) that doesn't leave a whole lot in the pipe.
It will be interesting to watch events unfold.
To sum up some comments:
Ricko pointed out that Thunderhorse is probably delayed to 2007.
Flankp pointed out that the Atlantis floater has just left the dock and production is now scheduled for 2007
I received an email confirming that Dalia will come on later this year
Another email pointed out that Yoho actually came on in 2003 and there was only a small incremental rise in 2006
Hongkong trader pointed out production problems at Chinguetti
Oilaholic pointed out problems at Syncrude
In fact the tar sands projects ramp up very slowly:
Foster Creek - "SAGD tar sand project. Produced 29,019 bpd in 2005. Planned to increase this to 41,000 bpd by end 2006. Inclusion in Megaprojects seems to be based on incremental increases in production that will continue to 2015."
Surmont - "Heavy oil by SAGD. Phase 1, scheduled for 2006 has a target of 27,000 bpd rising to 100,000 bpd by 2012. No recent news from ConocoPhillips or Total on progress."
Taking all this into account the list for the reaminder of 2006 looks like this:
17 Buzzard, 100,000 bpd, late 06
20 Dalia, 240,000 bpd
22 Foster Creek, 11,981 bpd, SAGD tar sand
24 Jubarte, 60,000 bpd, 2H 06
25 Surmont, 27,000 bpd, SAGD tar sand
5 big projects: 438,981 bpd new capacity going to come on for the remainder of 2006
So it looks like this will just about cover for Prudhoe.
Another email pointed out smaller projects may account for a further 300 to 400,000 bpd
Thanks to Rembrandt for providing good back up information.
They have a 12% interest in a Syncrude project and this 100% ownnership at MacKay River.
MacKay River Highlights
Located 60 km northwest of Fort McMurray, Alta., Canada
2005 production forecast is 24,000 barrels per day of high-quality bitumen
Plateau production of 27,000 to 30,000 b/d is expected in 2006
Estimated lifespan of 25 to 30 years after accounting for well maturity, turnarounds and unplanned events
http://www.petro-canada.ca/eng/about/6994.htm
http://www.petro-canada.ca/eng/about/11551.htm
Just wondering (BTW I'm a relative newby here, so please forgive me if I've made some awful four-function math error here).
Skrebowski's estimate of net capacity increase as published in the April 2006 edition of Petroleum Review (the one you cite) is 9.15 mb/d for 2006 through 2010 (1.985 + 2.140 + 1.456 + 2.150 + 1.420).
CERA's estimate of the `potential capacity growth' for the same period, as published in its press release of 8 August 2006, is 13.3 mb/d for the same period (source: http://www.cera.com/news/details/1,2318,8274,00.html).
That's a big difference but it's not a huge difference (though that depends on what you mean by `huge', I suppose).
So how come Yergin is considered by many members of the peak oil community to be the devil incarnate while Chris Skrebowski is still a shining angel?
"This capacity growth would accommodate rising world oil demand so long as there are no major disruptions in the actual flow of oil, for political or other reasons," said CERA Chairman Daniel Yergin in releasing the study
So as long as:
The Iranians aren't pissed
Pipelines don't corrode
The Jews and Arabs love each other
Misc others let Iraqi oil flow
The Russians, Kuwaitis don't hold back production
The Chinese don't buy too much
The Nigerians quit blowing up pipelines
we'll be okay
Thanks for your replies.
Gunga2006:
Both Yergin and Skrebowski make disclaimers - i.e. both distinguish between capacity and de facto demand. As Skrebowski states "It is virtually impossible to predict demand growth", which seems pretty obvious.
But BTW note that all the possible calamities you mention won't destroy the oil in the ground - in fact if they occur (which is pretty likely), they will postpone the peak for another couple of years. The MORE disasters there are today, the GREATER future capacity will be, given the SLOWER depletion rate. So if, like me, you're dying for the peak to occur pretty soon so as to be able to say "I told you so!", watch out - those disasters you predict could actually delay TEOTWAWKI!
Cry Wolf,
The CERA figures are certainly net - they can't be so dumb as to omit depletion.
You write that "the key difference between Yergin and Skrebowski is that the latter sees a peak around 2010 while Yergin sees production growing forever". That's a bit unfair on the diabolic Yergin - between now and the year 2030 (or whatever his peak year is) isn't `forever'. And AFAIK Skrebowski doesn't really commit himself as to peak year - he just stops predicting at 2010, which isn't the same as saying that 2010 is the peak. Why should net new capacity in 2010 (which Skrebowski puts at 1.85 mb/d) suddenly drop below zero in 2011?
PaulusP,
You quote Aleklett as saying that "it is obvious that [the Cera report] is not worth $2,500." Clearly, it IS worth that price for at least one client, since otherwise CERA would be bankrupt. Indeed, there must be quite a lot of investors for whom $2500 is peanuts.
My basic point was not whether Yergin is right or wrong. My basic point is that the gap between CERA's predictions and those of Petroleum Review doesn't seem all that great - so why the `dual morality?'
http://sydneypeakoil.com/phpBB/viewtopic.php?t=1972
You'll see that it peaks at around 92 million bpd around 2010 and if you look at the CERA projection here
http://www.energybulletin.net/19120.html
you'll see forecast capacity running at around 100 million bpd at 2010 and rising thereafter. Notably the CERA forecast has capacity way above consumption. These are two very different outcomes for the world economy and society as we know it.
I am a geologist and investor. I have followed peak oil from a distance for many years but only began to take a really close interest since May this year - so as I said I'm pretty new to this.
If you look at Oil CEOs table here
http://canada.theoildrum.com/story/2006/7/27/105730/458#comments
you'll see that the vast majority of countries are past peak (most likely irreversible decline) and that only a handful of countries have the potential to grow production in the years ahead - UAE, Kazakhstan, Algeria, Angola, Qatar, Libya, Azerbaijan, Brazil, maybe Russia and KSA. These countries need to cover for declining production everywhere else. If KSA goes into decline then I think it becomes an impossible task - this is Simmon's main message. When the country that has bailed you out for the last 30 years becomes part of the problem then it is game over.
Furthermore, I feel that EOR techniques are giving the world one last production rush but this is like a marathon runner going off on a sprint mid race, when she runs out of energy she will then collapse. My bets - 30% that we peak this year, 60% by 2010/12 and 10% that production continues to grow beyond 2012.
I don't feel I have an axe to grind on this one and will follow events closely and act accordingly.
Thanks for the information -- much appreciated.
You write that "the CERA forecast has capacity way above consumption. ".
That seems quite justified -- incidentally ASPO's eminence grise Laherrere 2006 does the same, since effective demand/consumption is downwardly (though not upwardly) unpredictable. Laherrere puts 2015 as the earliest peak year for precisely this reason -- he points out that peak could be a lot later in the event of demand constraints. And CERA's earliest year lies in 'the third decade' of this century, i.e. 2021 -- so there is in fact an overlap between the angelic pessimists and the diabolic optimists, at least as regards peak year if not peak demand in that year!
Like you, I don't have any axe to grind -- I'm just trying to follow the data wherever it goes.
Time will tell.
He said "as long as there are no major disruptions in the actual flow of oil, for political or other reasons."
All the things I noted are current or very possible disruptions to the flow of oil and I don't think it is reasonable to believe that these disruptions will be reduced in frequency or severity in the future. Nor is it an all inclusive list of potential problems.
He might as well have said, supply will meet demand unless it doesn't. IMHO
I agree with you about the slower depletion rates .
Regards
The peak is not something I wish for. It's going to be the start of a long hard grind when it takes hold.
Regarding the 2006 megaprojects report, it has been mentioned that the numbers drop off in 2010. What is the 'standard' lead-time for new projects to go from capital approval to production? Is it likely that capital will be deployed at this stage will result in production in those years?
Best,
First point would be that Skrebowski figures you quote are for net capacity increases (after capacity erosion is deducted). The gross capacity increase figures are:
2006 3385
2007 3740
2008 3206
2009 3950
2010 3270
Total = 17551
I'm not sure whether the CERA figures are net or gross.
I think the key difference between Yergin and Skrebowski is that the latter sees a peak around 2010 while Yergin sees production growing forever.
I think it is the case that the megaprojects recognised by Yergin and Skrebowski are getting close to the bottom of the barrel. The rate of major new discoveries has tailed way off over the last 20 years, so there just isn't a pipeline of new megaprojects that will go on for ever. I think it is the failure of Yergin to recognise this point that has led to his Devil status. Much depends on the status of ME opec reserves. These are clearly just made up - but that is not to pre-judge whether they are over or underestimated. See comments above from Darwinian on Ghawar and decide for yourself whether you believe that the Saudis could ramp production to 12 million bpd.
http://www.energybulletin.net/19120.html
"More things can be said about the report, but it is obvious that it is not worth $2,500. Part of the report is based on data not open for the public and the obvious reason for this is that CERA seek to make money from this hidden information. Oil production figures and data on reserves are of greatest importance for the global future and these should be available in the public domain as is the case in Norway and the UK."
Critiquing the 2006 Megaprojects report
Srebowski's projection (in black and magenta) follows closely the IEA demand projection (in green):
The last monthly data (in black) are already below forecast.
The other possibility is that we are seeing demand destruction in the developing countries and capacity withheld - which to my mind may fit the oil price. In 1929 recession started several months before the crash.
Third option is demand destruction in equilibrium with capacity erosion, i.e. the EIA production data = supply and demand, suggesting that demand is now well below the EIA forecast.
I'm looking at a 2 year chart for Brent front month and wonder if I can see a trend of exponentailly rising bottoms.
https://www.theice.com/marketdata/brentCrudeFutures/brentMarkers.jsp
Once some of the developing world gets burned off then the OECD may resume their bidding war.
I agree by and large with Stuart's analysis of the latest Megaprojects update. Depeletion rates are not known with enough precision. The tar sands are in trouble. More giant fields (eg. Cantarell, Daqing, Greater Burgan) are entering their death throes. Many projects (eg. some Brazilian deepwater projects) are delayed. Delays are now routine as production takes place in more challenging physical environments. Remember, projects get delayed but depletion never sleeps.
Note that CERA is talking about "productive capacity" (supply + spare capacity?):
"Just for fun." That's right!
Think about it. Why is the world paying 3 times more for gold now than we were three years ago? We're not at peak gold. No one is claiming that. Supply is way up. Demand is down, except for demand from investors, which is what really counts. The bottom line is, we have entered a longterm commodities bull market and commodities prices are going to tend to rise. Investors will tend to pay greater and greater amounts of money for commodities and the shares of their producers. I'm using the case of gold to illustrate how little price fluctuations in commodities sometimes have to do with supply and demand. Gold is up 300%, "just for fun."
As for oil, I'm sure supply and demand is a far more important part of the equation, but as I've noted in previous posts, I haven't seen much evidence over the last 4 or 5 years that oil isn't behaving, "just like any other commodity." If you look at the price charts for oil and the price charts for gold over the last 4 or 5 years, they look remarkably similar. The Saudis claim that, "the current high prices of oil have nothing to do with supply and demand." Is there an element of truth to that? Yes, there is. Investors have been pouring money into mutual funds and hedge funds which invest in all types of commodities. This has led to across the board increases in the prices of energies and metals. Is the Saudi explanation the whole story? It may not be. But until I see oil begin to behave as anything other than, "just another commodity," I will continue to treat it as such.
About oil behaving like any other commodity I would have to agree - it seems to be the surplus capacity that is driving price. When this is tight, supply concerns arise and the price goes up. The main questions right now is what is happening to surplus capacity. Is demand (hence production) falling, whilst new capacity is coming on line? Or is the world at productive maximum, i.e. no spare capacity, which would result in stocks being drawn down? To be honest I don't know the answer but I guess you believe the former whilst I am leaning quite strongly towards the latter.
Looking forward to 15 Nov.
Cry wolf,
http://www.financialsense.com/fsu/editorials/2006/0810.html
Saudi spare capacity is right here.
I think the rest of the oecd is drawing stocks because they are waiting for the dollar to fall. Might be a bad bet becauae oil importers need a lot of dollars to pay for their imports.
"Let's look at the production profile of Saudi Arabia who most analysts believe holds this elixir of camel dung which cannot be used by any refinery. We had the hurricanes (a) and the Saudi's said " We will respond". We had the Nigerian conflict (b) and they said " We will respond". Now we have the BP debacle (c) and they said , you guessed it " We will respond". See for yourself.
The latest edition of The Economist (12 August 2006 -- i.e. today's) has the answer (I write with my devil's advocate hat on):
"Saudi Aramco's proved reserves alone could keep the world supplied for several decades. But it is only exploiting ten of its 80 or so fields, so will be able to pump at the present rate for about 70 years even if it never discovers another drop of oil. In fact, Aramco and other NOCs [=National Oil Companies] are likely to find plenty more if they look, since their territory has not been very thoroughly explored. Only 2,000 wildcat wells have ever been dug in the countries around the Gulf, according to Leonardo Maugeri, an Italian oilman, compared with more than 1m wells in the United States." (my italics)
Source: http://www.economist.com/opinion/displaystory.cfm?story_id=7276986
Discuss ....