92 comments on IHS Data Suggest Kuwaiti and Global Proved Oil Reserves Significantly Lower Than BP Estimates
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Re Resources versus Reserves I'm using the IHS terminology. I said this:
Money and energy have not yet become equivalents. High oil price in the North Sea has meant a larger number of field decomissionings being postponed, old fields geting refurbished (Forties), and keeping the infrastructure out there means satelite fields can get developed. All that means more oil produced owing to higher price. The higher the price goes, more and more marginal projects will get developed world wide - until that is as you correctly point out that you use more energy to develop than you recover. I think there's a ways to go yet before we reach that point - but that will be the ultimate ceiling.
My feeling is that we go over peak in 2012±3 before net energy constraints kick in. I think eventually electric cars will be cheaper to run than ICE cars with gasoline at $200.
I don't think the equation is quite that simple. The problem is that costs also rise with rising oil price, and perhaps surprisingly, oil companies don't factor that in. I'm not even sure how you could predict how much costs would rise, it depends so much on external economic factors.
So when they say "economic recovery at $60/bbl", they mean if underlying costs don't change. As Luis points out, poor EROEI tends to mean poor $ROI, but the link is not 1:1 for the reasons Chris outlines. Marginal projects will stay marginal, and if the price of oil has been undervalued, in fact become more marginal. It's a classic case of diminishing returns, which IMO is the underlying reason for the shape of the Hubbert curve.
While projects with paid infrastructure can be squeezed to produce more, new projects are facing escalating costs and I have read several reports saying certain planned projects are "under review" due to costs.
Incidentally this appears to be a major Achilles heel in CERA's assumptions, which I haven't seen mentioned much. They don't seem to take account that the rate of exploitation of marginal sources will be much lower than conventional sources, which is why they can't make up for decline, and why their predicted plateau is highly unlikely.