Yes, there is a bigger story here which seems post-worthy. IEA has just issued their World Energy Outlook 2005 -- Middle East and North Africa Insights (MENA). I am heartened that it contains "600 pages of detailed analysis with more than 250 graphs and tables" but discouraged by price predictions like this

The average IEA crude oil import price, a proxy for international prices, averaged $36.33 per barrel in 2004 and peaked at around $65 (in year-2004 dollars) in September 2005. In the Reference Scenario, the price is assumed to ease to around $35 in 2010 (in year-2004 dollars) as new crude oil production and refining capacity comes on stream. It is then assumed to rise slowly, to near $39 in 2030. In the Deferred Investment Scenario the oil price reaches $52 in 2030.

Of course, Sadad al-Husseini told Peter Maass in The Breaking Point that 12.5/mbd could be reached and sustained but beyond that there would be trouble. Already in 2005 the IEA is pressuring the MENA countries to allow western oil companies to work with their NOCs to increase investment in production in the region. The obvious question is, why? To take one example, IEA's forecast for Iraq contains the following (from Forbes today)

In its World Energy Outlook report for 2005, the IEA predicted that Iraq's daily production can grow from 2 mln barrels in 2004 to 3.2 mln barrels in 2010 to 7.9 mln barrels in 2030.

It also forecasts the country's oil exports to grow from 1.4 mln barrels per day in 2004 to 2.5 mln barrels in 2010 and 6.9 mln barrels in 2030.

From the NY Times for Saudi Arabia, we learn

For example, under the agency's model, Saudi Arabia would need to bring its production up to 18 million barrels a day by 2030 to meet the jump in demand. Today, it produces about 10.5 million barrels a day.

It is at this point that I can't get the word "delusional" out of my mind. Love is fickle and though my sentiments toward the esteemed Ali Al-Naimi are well known here at TOD, I now find that I have a great upwelling of feeling for


Claude Mandil, head of the IEA.

That's all for now.

ah...but dave..we ARE making progress..if you just review the stages of loss..

http://www.extension.umn.edu/distribution/familydevelopment/DE2466.html

we have progressed past the initial stage ..denial...to the second stage ...blame..
 can't you just see it ..the IEA down the ever so obvious road says .."well, it wasn't our forecasting that was wrong, it was those darn money hungry saudis...if they would have just drilled more wells we would have all the oil we need."

$59 bbl oil in 2030 under their "worst case scenario?"...puleeze!

I doubt that Ghawar's production will increase from now until 2010.  Perhaps it will remain steady with Haradh Increment III coming onstream, although I think that production from Ain Dar and Shedgum could easily fall by more than 300,000 bpd when those areas go into decline.  The decline could happen at any time.  Some Aramco insiders are indicating that it could happen within the next few years.  I found a post made by someone named Glenn Morton, who said the following:

Message board post
"Engineers who have personally worked Ghawar
tell me that their reservoir models show a catastrophic decline in production by 2008-2009."

(It turns out that Glenn Morton has a webpage where he writes about several topics.  Here are his oil crisis articles: Glenn Morton's Oil Crisis Page)

Anyone recall what CERA's prediction for Saudi in 2010 is? I also see this as a very significant indicator that things are continuing to go wrong vis-a-vis former optimistic projections.

I have heard from a reliable source that the report says that Saudi Arabia is depleting with 600.000 b/d every year. The report supposedly goes indepth about every field and also addresses Simmons his concerns.

I am particularly curious about this little comment made:

``Saudi Aramco has managed its oilfields very conservatively over several decades in order to extend their plateau production for as long as possible,'' an attempt to ``maximize long-term recovery factors,'' the IEA says.

Where have we heard this before that production will "plateau" and "as long as ever" is just plain BS..  

If all of these numbers are in mid-2004 real dollars, the prices are not quite as unrealistic as they seem at first glance:

$35 today, inflated at an arbitrary 5%, is $44.66 in nominal dollars five years out. A moderate inflation assumption for a medium term doesn't change things much.

But over the long term, $39 inflated at 5% annually, over 25 years, gets us to a nominal price of $132 in 2030. The $52 price inflates to $176 in nominal dollars. At 6% it grows to $225, and will go up exponentially from there with higher inflation rates.

I assume oil will behave like everything else: there will be some real price increase trend, which will be compounded by inflation and currency variations.

When I posted about IEA's Resouces To Reserves report a while back, reporter Adam Porter pointed out that

Repeating a figure they first used in the IEA World Energy Outlook report they estimate that the total necessary investment cost "for worldwide upstream operations and transport [of oil]" by 2030 will amount to "$5 trillion."

That works out at roughly $564.5 million dollars a day, between now and 1 January 2030.

Actually, the press release now says "World energy resources are adequate to meet this demand, but investment of $17 trillion [under their business as usual Reference Scenario] will be needed to bring these resources to consumers". Then a bit later, Porter quoted Colin Campbell

"It is an absolute masterpiece," he stated. " A masterpiece of telling the truth in such a selective manner so as to get the juxtapositions quite right. All in order to mislead and confuse the situation. After all the best way to lie is to tell the truth, just in a manner that creates a wholly false impression of what is actually going on."

"The report is an absolute confession of `peak oil'," he said. "But at the same time the text goes out of its way to deny it. Really, it's a brilliant document. It takes immense skill and a marvellous command of language that allows [OECD] governments and oil companies to hide like this."

I am now convinced that Campbell is absolutely right based on this latest release on the Middle East and North Africa (MENA--includes Algeria, Egypt, Iran, Iraq, Kuwait, Libya, Qatar, Saudi Arabia, and the United Arab Emirates). Why? From the press release for the report (with inline comments):

"The importance of the Middle East and North Africa (MENA) to global oil and gas markets cannot be underestimated. These countries have vast resources, but these resources must be further developed. Investment should not be delayed [after 2005].

[comment--No kidding, this acknowledges the non-OPEC peak by 2010. New projects in the MENA countries have no hope of being in production before then and must start right now despite obvious worldwide shortages of rigs, pipelines and other infrastructure..]

In the MENA region, domestic energy demand is driven by surging populations, economic growth and heavy energy subsidies. Primary energy demand more than doubles by 2030. At the same time, MENA oil production will increase by 75% by 2030 and natural gas production will treble, allowing more gas exports. The region's share in global oil production will increase from 35% today to 44% in 2030. However, this means the countries of the Middle East and North Africa would need to invest, on average, $56 billion per year in energy infrastructure. The level of upstream oil investment required will be more than twice that of the last decade.

[comment--It is totally misleading for IEA to talk about the year 2030 because it's obvious they are in a panic about the period 5 years or so out from now. It is quite insane to be talking about the year 2030 in any case]

But OK, here's another important part of IEA's multifaceted delusional break with reality. I am referring to their comments on Climate Change. I believe this speaks for itself.

Oil and gas imports from the Middle East and North Africa will rise, creating greater dependence for IEA countries and large importers like China and India. Energy-related CO2 emissions also climb -- by 2030, they [under the business as usual Reference Scenario] will be 52% higher than today. "These projected trends have important implications and lead to a future that is not sustainable - from an energy-security or environmental perspective. We must change these outcomes and get the planet onto a sustainable energy path," added Mr. Ramsay [IEA Deputy Executive Director].

"The G8 Plan of Action, agreed at the Gleneagles Summit in July 2005, launched detailed initiatives to promote cleaner energy and combat the impact of climate change. The IEA was asked to play an important role. This strong global commitment indicates that governments are already adopting alternative policies - such as those in the World Alternative Policy Scenario - to achieve the G8 goals," explained Mr. Ramsay. Under this Scenario, global oil and gas demand growth is lower, but the world continues to rely heavily on MENA oil and gas. CO2 emissions fall 16% below the level of the Reference [business as usual] Scenario - but still increase around 30% by 2030.

Sustainable energy path? Greenhouse gas emissions rise 30% overall but are 16% less than they would be if the Alternative Energy Scenario is not followed by 2030. Still, the key right now is to coerce those price-fixing, lazy, and incompetent Arabs, Persians and assorted other followers of Islam to increase their own investment and allow foreign investment in order to increase production now--the quicker the better. Where's that Alternative Policy Scenario? Perhaps it's residing in the same place where Saddam Hussein's Weapons of Mass Destruction are hidden.

Now, any competent psychologist will tell you that making sense of or sorting out fantasies like these is a very difficult task indeed. So, I can not pretend to know what these IEA people are thinking.

Looks like the Wall Street Journal is alarmed by their interpretation of the latest IEA document.  Their coverage used the following title and byline:  "IEA Urges Global Changes in Oil Use:   Watchdog's Stark Warning To Trim Dependency Comes With Higher Price Forecast".  The first sentence of the article further paints the tone of the article:  "The International Energy Agency, in an unusually stark call for change that reflects rising anxiety over future energy supplies, urged the industrialized world to start weaning itself off oil."

The WSJ in particular picked up on concern that so much of the forecast increased production comes from so few countries which have a history of frequent large production disruptions.

Large organizations such as the IEA don't change their outlook on a dime.  If the IEA is like most large bureaucracies, even if most of the rank and file were convinced that peak oil was imminent conservative elements at the top would be slow to shift the message they were sending out to the world.

I think there has been a huge shift in the IEA position in the last several years.  They seem to be furiously back peddling away from their complete denial of a peak in oil production before 2030 to a position that on the surface is not incompatible with their former projections, but which increasingly supports some of the basic elements of the peak oil argument:  that non-OPEC production is nearing a peak (or plateau?), that most future growth has to come from OPEC and the Middle East OPEC states in particular, and perhaps we shouldn't be so trusting that those few states will really step up to the plate.

I think it's significant that the WSJ is giving the IEA report an alarming spin and noting that the report is a big break from past assessments, especially given the financial press' tendency to assume the cornucopian viewpoint without question.

The nightmare scenario for western oil companies is this:  They will invest billions in difficult/suspect oil fields, new refining capacity for heavy oil, petcoke, etc., and perhaps even some "alternative fuel" projects.  Then suddenly a "MENA" country, as the most likely location for such things, discovers a new oil field, reserructs an old one with enhanced recovery, or otherwise opens the taps wider.  Then the price of oil will drop by $20/bbl or more and the billions invested in the alternative project will go down the toilet.  Investors lose money, company share price drops, lay-offs, plant shut-downs, etc.  

Hence IEA's push for making sure the orange (MENA fields) is squeezed dry before moving on to the less juicy fruits.  

       

If the fuel supply problem was viewed as the national security issue it is then the price of investment in renewables becomes irrelevant.  During the 1950s there was scarcely a politician or businessman who objected to the price of B-52s and ICBMs. We built bombers and fighters and missles at a furious pace and in the process created millions of good paying jobs. If we could afford to do it then we can afford to aggressively build wind farms and algae plantations and storage batteries and zinc fuel cells and recreate the middle class again. Frame the solution as a patriotic issue instead of an economic issue and within 10 years the USA could be a fuel exporter again.