The Oil Drum | CNBC: Matt Simmons and John Kilduff Discuss the GAO Report and the Ramifications of a Plateauing Oil Supply with Bob Pisani

123 comments on CNBC: Matt Simmons and John Kilduff Discuss the GAO Report and the Ramifications of a Plateauing Oil Supply with Bob Pisani

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bloomingdave on March 29, 2007 - 11:52pm

Yes, the interviewer seemed downright breathless in his inquiry.
And Simmons isn't mincing words.
Perhaps we are reaching twin thresholds; of penetrating public consciousness
AND reaching the production peak, simultaneously.

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ckaupp on March 29, 2007 - 11:59pm

Yes, Bob Pisani was more excited than I have ever seen him--pretty interesting. Also, I was collecting some links to send to friends and noticed that the EXXON CEO was on CNBC on March 7th touting that PEAK OIL is a SCAM. Let's see, 3 weeks and one report later. I think he should have to face Simmons. WesTexas's "iron triangle" was certainly at work on the 7th.

Matt did seem very concerned, more so than usual.

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Prof. Goose on March 30, 2007 - 12:03am

that's likely because he was reading these...

http://www.theoildrum.com/node/2325
Saudi Arabian oil declines 8% in 2006

http://www.theoildrum.com/node/2331
A Nosedive Toward the Desert

http://www.theoildrum.com/node/2393
Water in the Gas Tank

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DelusionaL on March 30, 2007 - 12:43am

A scam? A SCAM?...well exxon its almost summer baseball season and its your turn to batt. Don't miss we are watching...and others are watching too.
Every little kid who rides a bike,
every young couple who is starting a life together,
college kids going to school,
people ready to retire,
waitresses serving coffee,

Are you going to have the oil they expect so thier life doesn't turn to shit before thier very eyes?

I certainly hope so... they look at you as being the brightest and most in the know.

It's your turn, what ever you do - don't miss...it's your turn and we need another home run.

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ckaupp on March 30, 2007 - 12:55am

Yep Go check it out on CNBC's site. Do a search on PEAK OIL and the interview of the 7th will be one of the items listed.

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ckaupp on March 30, 2007 - 12:57am

The other think I noticed is that Kilduff seemed somewhat dismissive at first with his 18% comment plus new projects stuff. But after Matt spoke, he seemed to change his tune a bit. Not sure if he felt like he'd been "caught" spewing MSM nonsense...

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Cid Yama on March 31, 2007 - 11:46pm

Nothing like saying something stupid and then having Matthew Simmons come on and make it obvious you were spouting nonsense. Must have been very embarrassing for him. Good.

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Fractional_Flow on March 30, 2007 - 8:24am

Re: XOM 2006 reserves announcement Summary of XOM reserve additions-

Ask Tillerson about this... let's them hide a 5 billion barrel oil reserve writedown--

They are a helluva lot smarter than Shell.

someone please fill in the 2006 blanks- all numbers Bbbls

Year Additions North Field LNG Production

2004 1.8 1.7 1.6

2005 1.7 1.6 1.5

2006 1.95 ??? 1.6

North Field LNG is where the action is.

Does this not support Hubbert's peak???

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ckaupp on March 30, 2007 - 11:51am

FF, please help this dummy!

They can hide a writedown of OIL in their LNG numbers?

Every time I think I have a very basic handle on this stuff, another fly ball comes into left field while I'm still standing there scratching my butt. Oh gawd, that's an awful, gross analogy, SORRY everyone. But it's pretty much how I feel: Standing in the middle of nowhere wondering what to do with the information overload and its implications....

Some days I feel almost paralyzed even though I am ELPing. There are always the questions: Am I doing it right? Did I pick a good spot? Do I even know what the heck I'm doing?

So help me here FF, I don't understand.
Cheryl

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Fractional_Flow on March 30, 2007 - 12:22pm

Exxon touts their 114% reserve replacement over the last 5 years-- but it is on a BOE basis.

They hold back on the North Field LNG to just replace their production plus a smidge more so every year they can tell the ANALysts they replaced reserves.

I was told that the gas from these LNG projects sells at $1.25/MCF at the wellhead or about $7.50 per boe. XOM touts a reserve development cost of $8/BOE.

In the meantime crude oil reserves are dropping .... but the effect is never seen by the Know nothings.

This is materially the same as covering up an oil reserve writedown to me.

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Slippery Slope on March 30, 2007 - 2:18pm

http://www.exxonmobil.com/Corporate/About/OurManagement/Corp_OM_Tillerso...

Rex W. Tillerson is Chairman and Chief Executive Officer of Exxon Mobil Corporation.

A native of Wichita Falls, Texas, Mr. Tillerson earned a Bachelor of Science in Civil Engineering at the University of Texas at Austin before joining Exxon Company, U.S.A. in 1975 as a Production Engineer.

In 1989, he became General Manager of EUSA's Central Production Division, responsible for oil and gas production operations throughout a large portion of Texas, Oklahoma, Arkansas and Kansas.

In 1992 Mr. Tillerson was named Production Advisor to Exxon Corporation.

Three years later he was named President of Exxon Yemen Inc. and Esso Exploration and Production Khorat Inc., and in January 1998 became Vice President of Exxon Ventures (CIS) Inc. and President of Exxon Neftegas Limited. In those roles, he was responsible for Exxon's holdings in Russia and the Caspian Sea as well as the Sakhalin I Consortium operations offshore Sakhalin Island, Russia.

In December 1999, he became Executive Vice President of ExxonMobil Development Company.

Mr. Tillerson was named Senior Vice President of Exxon Mobil Corporation in August 2001, and was elected President of the Corporation and member of the board of directors on March 1, 2004. He assumed his current position January 1, 2006.

Mr. Tillerson is a director and a member of the Executive Committee and Policy Committee of the American Petroleum Institute. He is also a director of the U.S.-Russia Business Council and a trustee of the Center for Strategic and International Studies. He is a member of the National Petroleum Council, the Business Roundtable and its Energy Task Force, an honorary trustee of the Business Council for International Understanding, and a member of the Emergency Committee for American Trade.

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Fractional_Flow on March 30, 2007 - 12:24pm

NOte that you can google the 2005 and 05 reports and the North Field LNG component is expressed explicitly.

Not so for the 2006 report- I wonder why??

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ckaupp on March 30, 2007 - 12:45pm

Funny you should mention that, I've been trying to find the 2006 numbers for the north field for 1/2 hour and haven't been able to. I thought it was just me....

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ckaupp on March 30, 2007 - 1:02pm

So, it not only bodes ill for oil replacement, it has a financial impact since they are giving the gas away at a loss.

There was that one analyst that did catch the reserve issue, but his comment about the reserves wasn't really addressed in the response...it was a political type of response from Hubble.

This brings up another concern of mine. About the middle of 2006 either a new law or a signing statement (I lean toward signing statement) went into effect whereby companies can falsify their financial statements and not be held liable under the umbrella of "national security." It is pretty vague, doesn't say what companies, and doesn't say what constitutes national security. It was all done very quietly and it kind of freaked me out. At that point, I started moving my IRA investments to mainly cash and small companies with climbing reserves and drillers/support.

I considered that signing statement to be the real canary in the coal mine concerning the state of our economy and "national security," and being PO aware I felt that the "national security" issue related to oil and its ultimate effect on the US. If everyone freaked out and bailed from the stock market, it would accelerate the problems. I saw it as an attempt to mask the problems and make everything appear to be business as usual. Just MHO.

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ckaupp on March 30, 2007 - 2:07pm

I went through some of my email archives. For those that may be concerned about the STOCK MARKET, I have this to offer:

… Business Week Online has just reported that George W. Bush on May 5 signed a memo entitled “Assignment Of Function Relating To Granting Of Authority For Issuance Of Certain Directives: Memorandum For The Director Of National Intelligence.” In the document, Bush assigned intelligence czar, John Negroponte, the task of waiving Securities and Exchange Commission rules, established in 1934, pertaining to accounting disclosures by publicly-traded companies. As a result of no longer needing to reveal financial information to shareholders in the name of national security, the cloning of Enron, having been in process for several years, is now complete. Instead of being required to disclose valid accounting ledgers, U.S. corporations have now been given carte blanche to maintain fiduciary legerdemain. I must ask: How can any sane human being persist in believing that a legitimate government exists in the United States?

If anyone is interested, I have a longer report that breaks down the sections of the signing statement.

I am posting this in response to FF's posts about reserve shenanigans.

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NC on March 30, 2007 - 2:22pm

Cheryl,

Would you please get this in front of Prof G. so he can get it posted at the start of a thread.

The statement
"Bush assigned intelligence czar, John Negroponte, the task of waiving Securities and Exchange Commission rules, established in 1934, pertaining to accounting disclosures by publicly-traded companies."
completely undermines the checks and balances put in after the 1929 crash to prevent a repeat of same.

All the assurances from the financial institutions that we can't suffer another round of bank failures and stock market crash like the depression, because of changes to the system, carry no weight if those changes have been recinded recently.

Great catch, thanks for posting.

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ckaupp on March 30, 2007 - 2:40pm

Sure can.

It was so stunning that I considered it the beginning of the end and a good reason to avoid all large US corps especially and to be very concerned. I tried to warn family and friends, but everyone seemed to think I was over-reacting since they consider me to be a "peak oil kook" overly concerned with fascism and loss of freedoms. And Negroponte was one of the big guys behind the Iran/Contra affair and not trustworthy in my estimation.

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ckaupp on March 30, 2007 - 3:33pm

If Prof G doesn't want to post the text I have, I'm willing to email it to anyone who wants it. Please send your request to my backup email account at lostinparadisetoo@yahoo.com

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Cid Yama on April 1, 2007 - 12:12am

I was one of those people who lost money because Worldcom was fudging the books. I'm out of the market all together except for Cameco(CCJ) Where I know enough that I could care less what their books say. How can you possibly trade otherwise if none of the financials are known for sure. It sounds to me that the total reason for this is the avoidance of "panicing the market" by telling them the real situation. In other words setting up investors for the big fall, in order to keep the game going for a little longer. Get Out, Get Out Now! Now that I think about it, I think I'll get out all together. Maybe it's time to put it into a large chunk of land I intend to live on and make Post-Oil improvements. The only reason for such a signing statement is the game is over except for the losing.

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godraz on March 30, 2007 - 2:35pm

ckaupp, it was a "presidential memo" that Dubya signed on May 5th, 2006. All the memo did was *delegate authority* to the Intelligence czar to allow for exemption of proper SEC book keeping in the name of national security. Here's a http://www.businessweek.com/bwdaily/dnflash/may2006/nf20060523_2210.htm?..., >Business Week article.

This presidential authority has apparently been in place since Jimmy Carter, but GWB has moved where the buck starts and stops on this call to his Intelligence czar. With the number of smoking guns and dead bodies lying around our illustrious chump-in-chief but never his fingerprints, this is just more of the same.

I agree that the vagueness around this whole National Security & economic transparency stinks to high heaven. As it is the amount of number fudging and market management that our Govt. and the Fed does nowadaze is criminal. This just makes it legal for companies to lie on their numbers if our National Security interests are deemed at risk. Does PO fall into this category? I think it does too.

Now, excuse me while I go polish my tin-foil cap.

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ckaupp on March 30, 2007 - 2:47pm

The clip I pasted is from the BusinessWeek OnLine article.

BTW, regarding your comment "This just makes it legal for companies to lie on their numbers if our National Security interests are deemed at risk" ......"JUST????"...as in no biggie?

I believe they already consider this to be a national security issue. It has been since 9/11.

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Stuart Staniford on March 30, 2007 - 3:05pm

This seems to me necessary and unexceptionable. It stands to reason that Boeing, Lockheed, etc can't be providing detailed breakdowns of their classified work in their accounting reports and their needs to be some legal mechanism for taking care of that (if one is going to have a classified budget at all, then obviously it mustn't be posible to figure out who is getting how much of it).

So in the absence of evidence of specific misuse of this authority, I don't see an issue...

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ckaupp on March 30, 2007 - 3:16pm

It does not say what companies or for what reasons, in other words defense companies are not singled out. Since financial statements are foundational to our capitalistic investment system, this seems quite important. If I over-reacted, I wasn't alone -- BusinessWeek was pretty blown away. Note the last sentence of the clip I pasted--that wasn't my comment, it was BussinessWeek's.

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godraz on March 30, 2007 - 6:09pm

Note the last sentence of the clip I pasted--that wasn't my comment, it was BussinessWeek's.

I'm sorry to inform you that you are wrong. The quoted comment used above is from Carolyn Baker in an article she wrote for FromTheWilderness.com

As Stuart suggests, it may not be as nefarious as it seems, but with this administration (and government in general) I think it worthwhile to question everything they do.

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ckaupp on March 30, 2007 - 8:49pm

I accept that I was mistaken on the quote.

I still don't feel that it is acceptable to falsify financial statements for a public company for any reason. If they have reason to hide what they are doing, they should be private, not public. Accurate financial statements are the basis for investing in public companies. Anything that undermines the public trust is bad news.

Has anyone looked at the list of companies currently under scrutiny for misdeeds and backdated options? It's a pretty stunning list that contains some of Americas premier companies. The latest addition to the list was Beazer Homes. And Dell recently admitted they may have some accounting "issues". Whether they are related to the signing statement or not, there are a lot of shenanigans going on in our financial world.

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Cid Yama on April 1, 2007 - 12:39am

Ckaupp,
You are correct. It's time to TOTALLY get out. If the world is about to fall off a cliff because the supergiants are about to collapse like a row of dominoes, I would say THAT is a national security issue and that means listed reserves, projected production, imports and costs all fall under the umbrella of this signing statement. In fact, anything that any publicly traded company engages in that might let the cat out of the bag would fall under this. That's why it's so obvious they are lying; BECAUSE THEY ARE AND THEY'VE BEEN GIVEN PERMISSION BY THE US GOVERNMENT.

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Aniya on March 31, 2007 - 2:42am

Hi Stuart,

Thanks for your comment.

re: "So in the absence of evidence of specific misuse of this authority..."

Some generic qs:

1) Is there oversight? So, someone, somewhere *does* have an opportunity to example the "detailed breakdowns of...classified work"?

2) How is the oversight managed?

3) Who is actually in a position to bring forward evidence of specific misuse?

4) Can these people, (3) do their jobs without interference?

5) As far as I know, there is at least one group of people who seem fairly convinced that there is no oversight that is meaningful in regard to the work done at the national weapons' labs, namely www.lasg.org. To take one example, which falls in the general category Boeing, Lockheed, etc. might also be in.
For another example, see "Blackwater: The Rise of the World's Most Powerful Mercenary Army" by Jeremy Scahill.

5a) In other words, if "evidence of specific misues" did/does, indeed, exist - who would know? Who is in a position to know? Who is in a position to do the work required to find out?

As an example, the judicial firings evidence was investigated and compiled by an independent journalist group, "Talking Points Memo", as reported in an article in the LA Times "Column 1" March 17, 2007. (I'd try for the link, but on this computer, it never works.)

6) This may or may not be relevant...I'm wondering if you think the same idea applies to matters related to the things we discuss here - energy, etc.

In other words, re: "necessary and unexceptional"...
Yes, point well taken if one accepts classified work as part of BAU (so to speak). At the same time, who gets to decide what is classified to begin with? And, given "necessary", then, my other qs follow.

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godraz on March 31, 2007 - 10:39am

^ Exactly!

Oversight? Trust us.

"How soon we forget history... Government is not reason. Government is not eloquence. It is force. And, like fire, it is a dangerous servant and a fearful master." - George Washington

"This conjunction of an immense military establishment and a large arms industry is new in the American experiment. The total influence -- economic, political, even spiritual -- is felt in every city, every State house, every office of the Federal government...
We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of huge industrial and military machinery of defense with our peaceful methods and goals, so that security and liberty may prosper together." - Dwight Eisenhower

Trusting our government, especially this one, is a fool's paradise.

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Aniya on March 31, 2007 - 7:48pm

Edit: Please substitute "firing of US Attorneys" for "judicial firings" above.

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ckaupp on March 31, 2007 - 9:04pm

Thanks Aniya. I was wondering if our actuary was lurking...

Hence my concern. There seems to be no oversight in sight anymore anywhere. The US is terribly in debt, we are at war, and we are facing several huge crises at the same time -- one of which is the biggest challenge to ever face modern society or even humankind.

There is no question, power corrupts. Always has, always will. Now they want the option to lie on financial statements when my IRA funds are at risk. I don't like it. It sounds just like the eavesdropping on telephone calls: Trust us, we are only listening in on overseas calls between terrorists. Oh, okay, Never mind, besides my game is on ESPN right now.

It is up to "We the People" to monitor our government and make them obey the law of the land. If we don't, who will?

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Aniya on April 1, 2007 - 11:06pm

Thank you, Cheryl,

I appreciate your bringing this up, as I hadn't seen it. The Business Week article, just on its face, raises bells to me.

I wanted to add to my thoughts about what Stuart was saying. The idea about oversight being necessary, just like the necessity of "a free press", is part of the idea of things like "checks and balances", it seems to me.

As this built-in oversight is removed or altered (or was not set up to run well in the first place), problems could be almost guaranteed to arise, even without particular intent (necessarily).

One way to look at it is - the right structure has to be in place to allow for people to be able to act in an honest/moral fashion, it seems to me.

One could make the case, philosophically, that things have to have a basis of trust at the foundation, and in a sense, I agree. And this may be (just guessing) where Stuart's coming from - i.e., no particular motive on anyone's part, just "BAU". At the same time, if something comes up, without the right structure, (the "checks and balances"), there is no way to correct a mistake. (To take the most naive case, i.e., one w. no particular intent.) Anyway, more cents. Thanks.

Yes, I'd also be interested in what Gail has to say about this. (Jack and others as well.)

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PrisonerX on March 30, 2007 - 6:05pm

Presidential Memo.

There seems to be quite a discussion on Presidential memo's and there constitutionality. Claiming it as a legal reason is not claiming its constitutional or legal.

"apparently" been in place. This to me does not say "here is the Constitutional authority> Apparent is a weasel word.

Stuart claims there is a blanket authority given to the President and not only that this blanket authority can be DELEGATED to a non elected official to do as he pleases.

Where is such authority to do so. What law or action is available to prove such a position.

It would seem that over site of this is missing "again". National Security matters are not above the three branches unless great need can be shown. Blanket authority given to an un-elected official to do as he please.

I don't think so.

Nice catch CK, with the proven record and the one now on display with the Justice Department I think it stands to reason that trust in using such authority for the public good instead of political/private/personal/etc etc. good is way past its prime.

Impeach now.

Quid Clarius Astris
Ubi Bene ibi patria

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godraz on March 30, 2007 - 6:23pm

"apparently" been in place. This to me does not say "here is the Constitutional authority> Apparent is a weasel word.

Yes, I agree wholeheartedly. But for anyone who has been paying attention over the years it is quite apparent the weasels don't give a damn what the Constitution says. And, apparently, neither do We The Sheeple.

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PrisonerX on March 30, 2007 - 6:29pm

I am no sheeple.

hence the moniker

Quid Clarius Astris
Ubi Bene ibi patria

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ckaupp on March 30, 2007 - 12:37pm

FF, is it this?

A couple of questions relating to Qatar given your substantial investment plans in that country, and in particular relating to the North Field itself, looking over the last couple of years, it seems as though roughly 90 percent of your proved reserve additions have come from that field alone. So the question is what’s left to book? Presumably GTL is one that’s still in the sidelines, given the Qatari’s have yet to fully sanction that project, what else might be there?

I still haven't found the numbers, but this is a question posed at the 2006 year-end news conference. So it appears that 90% of their reserve replacements for OIL were actually OIL EQUIVALENTS, or GAS, and they touted that overall number for everything. Only by digging deeper into the financials would you realize that proved OIL reserves went down, not up.

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Calorie on March 30, 2007 - 1:00pm

Indeed, Exxon's acquisition of Mobil in 1999 was seen largely as a natural gas play. Paul Roberts wrote about this in The End of Oil:

[Natural gas] is also part of the driving force behind many of the megamergers in the oil industry during the 1990s; for example, although Exxon and Mobil glossed their 1999 merger as a joining together of complementary strengths, most in the industry saw the union as a tacit admission by Exxon that it had failed to exploit its stranded gas assets, whereas Mobil was one of the acknowledged leaders in LNG.

From Paul Roberts, The End of Oil, pg. 177 (Big Oil Gets Anxious)

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paal myrtvedt on March 30, 2007 - 9:50am

- there are emotions in the air - these people know the implications to the subject - and now more will follow suit..

I reckon Peak Oil in the public domain after this NBC interwiew - the message was timely put foreward and in a sober mannor. If I was new to the consept of peak oil - my eyebrows would loosen ... and actually in watching this I became a little saddened , even if there where nothing new to me - but I got the message on MSM as a headline story.

Congrats americans - You lead the way in informing your populace and start taking on the issue 'that surmounts even time itself', in Europe it is deadly silent by.... at least for now. I wonder when you will deny the SUVs (my stop-watch is ticking) and enter the new era of cars used back in Bedrock-city - nope - not Detroit-Rockcity those are the ones you shall start to decommision

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slx on March 30, 2007 - 11:59am

2006:
http://www.peakoil.nl/wp-content/uploads/2007/02/gazet_2012oliefeest_25_...
"After 2012, the oil party is over."

1999:
http://www.eos.be/Cblad/ShowNummer.asp?qJ=1999&qN=12

"Steenkool, aardgas, aardolie en zelfs uranium zijn waarschijnlijk een kortdurende, misschien zelfs ongelukkige zijsprong. We weten nu zeker dat fossiele brandstoffen geen toekomst meer hebben."
"Coal, natural gas, petroleum and even uranium are likely a short-lived, maybe even unfortunate sidestep. We know know for certain that fossil fuels no longer have the future."

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