The Oil Drum

Chevron Australia has been in the news this week after announcing plans to develop a new LNG plant on the WA mainland to process gas from its Wheatstone discovery on the north west shelf. Interestingly, as well as feeding gas into the domestic network, they are considering developing a gas-to-liquids facility as part of the plant - which may slightly reassure those who look at both our trade deficit (in which imported liquid fuels are a major factor) and the possible impacts implied by the export land model.

[editor's note, by Dave Cohen] Fellow TOD contributor Bubba is co-author of this report. He is an industry insider. It seemed important for those of us concerned about peak oil to respond to the Jack-2 test well result and all the publicity it has spawned. I also had conversations about this piece with Byron King at Whiskey And Gunpowder. Byron writes frequently about peak oil issues. I take full responsibility for this post's contents since I did the final editing.

With the successful test drilling of Jack-2 in the ultra deepwater Gulf of Mexico, there has been a media blitz proclaiming the good news. The "peak oil" theory is under attack. From Business Week's September 7, 2006 article Plenty of Oil--Just Drill Deeper The discovery of reserves in the Gulf of Mexico means supply isn't topping out, we learn

You can tune out all the scare talk about Peak Oil for a while--probably a long while. Peak Oil is the theory, on the verge of becoming conventional wisdom, that the world's petroleum supply is topping out and will not be able to meet global demand soaring along with the economies of China and India. But a successful test in a mammoth field deep beneath the Gulf of Mexico, announced on Sept. 5 by Chevron (CVX), Devon Energy (DVN), and Norway's Statoil (STO), should help put that scary scenario on hold for decades....

Cambridge Energy Research Associates predicts world oil and natural gas liquids capacity could increase as much as 25% by 2015. Says Robert W. Esser, a director of CERA: "Peak Oil theory is garbage as far as we're concerned."

Let's take a closer look at the prospectivity, geology, economics, technology, reservoirs, hydrocarbons and logistics of the Lower Tertiary play in the Gulf of Mexico (henceforth the LTGOM).

While I was gone Dave kindly replied to Dr Drollas' comments to my post regarding Depletion and the CGES. Since today was the day that Chevron announced the Jack prospect test result, it might be considered that this speaks more to his argument than mine. The well showed that from about 40% of the pay zone they were flowing 6,000 bd, and a second well to further define and appraise the field will be drilled next year.

Further within the considerable comment that has been provided on a number of stations was the comment that this is the "final frontier" for oil exploration. Actually it probably isn't. There are still some places further North that have not yet been fully explored, but it is getting very close to the limit of where we can afford to economically look. We are, by the geological definition of where oil is likely to be found, starting to run out of places to look for these large fields.

There are a couple of new documents out on the Web that you might find interesting.  The first is the initial Discussion Analysis based on the ongoing "Will You Join Us" campaign by Chevron (for which thanks to Powerswitch).  The second is the full CIBC Monthly Report (a pdf file) for which thanks to Big Gav.

 The initial Chevron discussion was on the topic "How can we make oil and gas supplies last longer, as the search for other fuels continues?"  The debate was summarized by the Aspen Institute, which also provided a couple of contrasting expert opinions to get the debate started. They also seemed quite happy to editorialize a bit when it came to the reporting as in:

Perhaps surprisingly, no one mentioned the potential of cellulosic ethanol, using as a feedstock biomass composed primarily of plant fibers that are inedible by humans."

Although biofuels were the subject that generated the most discussion among the participants, with some 1,072 responses which were mainly from individuals, about 10% coming from academic addresses.

Shell and Chevron-Texaco are two companies that, I would argue, are precipitously close to acknowledging the peak oil problem.  Between Chevron-Texaco's "Will you join us" ad campaign which states:

"Energy will be one of the defining issues of this century.  One thing is clear: the era of easy oil is over. What we all do next will determine how well we me the energy needs of the entire world in this century and beyond.  Demand is soaring like never before.  As populations grow and economies take off, millions in the developing world are enjoying the benefits of a lifestyle that requires increasing amounts of energy. In fact, some say that in 20 years the world will consume 40% more oil than it does today. At the same time many of the world's oil and gas fields are maturing. And new energy discoveries are mainly occurring in places where resources are difficult to extract, physically, economically and even politically. When growing demand meets tight supplies, the result is more competition for the same resources.  We can wait until a crisis forces us to do something.  Or we can commit to working together, and start by asking the tough questions: How do we meet the energy needs of the developing world and those of industrialized nations? What role will renewables and alternative energies play?  What is the best way to protect ourenvironment? How do we accelerate our conservation efforts?   Whatever action we take, we must look not just to next year, but to the next 50 years."

...to Shell Director Malcom Brinded's recent comments that:

The challenges of supplying the expanding energy needs on which rising living standards for billions of people depend - while still preserving our environment - are increasingly apparent.  I believe they are among the greatest challenges ever  faced by mankind.