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25 comments on Peak Oil Letter from Energy Minister

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zceb90 on May 9, 2006 - 11:16am Permalink | Subthread | Comments top
I don't see the $17 trillion of oil industry investment by 2030 being achievable.  Even if current investment levels could be rapidly ramped up the industry is out of capacity in terms of quality drilling rigs and especially skilled personnel.  When I attended Offshore Europe 2005 in Aberdeen last September speakers to associated conference reported average age of workforce was 49.  It will take years to recruit / train replacements to this ageing workforce even to maintain current number of skilled people, let alone ramp up workforce rapidly to match all this new activity (required by IEA forecast and UK Gov't followers).  Shortage of quality people is not just a UK problem but is worldwide as Matt Simmons and others have regularly pointed out.

If recent actions by BP are anything to go by we are not off to the best of starts in investing the $17 trillion.  On February 08, 2006 they announced the biggest proposed cash return to shareholders in British corporate history: http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/02/08/cnbp08.xml&menuId=242&sShe et=/money/2006/02/08/ixcitytop.html  . The $65 billion being returned to shareholders in form of dividends and stock buybacks over the next 3 years could have been used instead to increase exploration and development drilling, address refinery constraints etc.  On this basis it would appear that BP don't consider 'all the new prospects identified by IEA sufficiently attractive to heavily commit new funds to'.  ExxonMobil are similarly buying back their own stock.

We are now left with the question - 'if BP, ExxonMobil etc are buying back stock rather than spending the extra on discovering and producing all the extra (IEA / USGS / CERA) oil who will'?

Chris

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mididoctors on May 10, 2006 - 1:27am Permalink | Subthread | Parent | Comments top
Perhaps we could ask Mr wicks to address this specific point concerning the source of investment.

Boris
London

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Jamie on May 11, 2006 - 5:26am Permalink | Subthread | Parent | Comments top
I think you have just brilliantly summed up Reality v Cornucopia and pointed out where those in the best position to know are putting their money. IMHO it is just a matter of time before countries sitting on the resources start overtly (as opposed to covertly?) conserving for their future generations thus accelerating Westexas' predictions.
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zceb90 on May 11, 2006 - 10:16am Permalink | Subthread | Parent | Comments top
Appreciate your comments.  It's not just BP either, here's more of the same from XOM:
The company also spent $5 billion to buy back stock in the quarter, and promised to buy back $6 billion in stock in the second quarter. Oil companies like Exxon Mobil have been attacked for spending hefty amounts to buy back stock and pay dividends rather than reinvesting those profits to boost production.
Full news item: http://news.yahoo.com/s/nm/20060427/bs_nm/energy_exxon_earns_dc
Such actions by big oil provides a clear indication that, whatever they say in public, their strategy in spending the majority of their earnings on stock buybacks and dividends (as opposed to exploration and addressing industry wide capacity constraints) points to an industry which itself considers that the best times lie in the past.  In effect their actions point to slow liquidation of the company.
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