The Oil Drum

30 comments on An update by Chris Skrebowski

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Khebab on October 20, 2005 - 11:13am

The conclusions are scary!

In 2004, effectively all the world's spare capacity was used up in meeting unexpectedly rapid demand growth. It is not at all clear if the world's oil companies
can provide an incremental 3mnplus b/d from all the small, untabulated projects and infill drilling going forward year after year. The world has now reached the point where the volumes lost to depletion are much larger than the levels of likely new demand. This means total increments requred (new demand plus depletion) are running at around 7%/y, while the largest supply increments in 2006 and 2007 are contributing 3.6% and 3.5%. It would seem most unlikely that small projects and infill drilling could account for the remaining required 3.5%. The inescapable conclusion is that oil prices will have to remain high enough to destroy demand, bringing supply and demand back into balance.

I'm having trouble adding up the different numbers in his table especially on the "Extra-volume required" entries.

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Rick on October 20, 2005 - 4:03pm

Add this to a great find by Shez from the October 2005 Petrolem Review, posted on a previous thread: http://www.odac-info.org/bulletin/documents/PetReviewOct2005.pdf

"Quite remarkably, in the first half of 2005 the top five, the top ten and the top 22 publicly quoted oil companies all produced less crude and NGLs [Natural Gas Liquids] than they did in 2004. Compared with 2003, ten companies produced less in the first half of this year. Nine companies produced less than in 2002. Clearly, it is no exaggeration to say that the world's largest oil companies are now really struggling to hold production levels."

When new production more than offsets decline, we can't see the decline clearly. Now, with total output figures declining, we may begin to see people taking notice. Unfortunately, like the tobacco industry, increased prices are very effectively masking a decline in volume.

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Stuart Staniford on October 20, 2005 - 10:52pm

I went through all of Shell's E&P PR releases for the past five years recently. There are two things of interest to this thread. One is this fascinating report on the investigation into their reserves write down. It makes it really clear that they have faced tremendous stock market pressure to replace their reserves and they've been struggling to do it for quite some time. This led them to cross the line into booking things they shouldn't have booked as reserves. So it's very much a peak-oil story (though they never use that terminology) and a fascinating look at the inside workings of a global oil company struggling to face it. The other thing of interest is their 2005 news releases which contain very little indeed about oil, and far more about NG and GTL. I got the distinct feeling that they were on the way to being an NG company rather than an oil company.