The Oil Drum

The ongoing energy supply problems that have emerged from continued growth of the economies of Southern Africa, and which I wrote about following my trip down there, may well be an early precursor to a future that many countries might come to face before too long. Signs that overall energy demands have been rising beyond the immediate capacity of local systems to provide supply can be transiently overcome by increasing imports of power. But when the supply of that power becomes threatened, or disappears due to factors that can range from the increasing domestic demand for power – which led South Africa to restrict exports – through the collapse of domestic order – the problems that Zimbabwe currently faces, or the inability to deliver available power (Mozambique has large hydro power reserves but cannot transmit the power to places such as Botswana) then suddenly the switches on the wall don’t work.

There are lots of excuses why not to make investments in new power plants based on domestically produced energy, particularly in a changing political climate, but the failure to properly prepare for the future by building anticipated capacity, or to assume the availability of foreign supply sources (such as increased volumes of LNG) that may not be around when needed may well mean that at some point in the non-too-distant future the switches on our walls may not work either.

As you may have noticed President Bush commented this past week on his (and apparently their) doubts that Saudi Arabia could significantly increase crude oil production. While this comes as no great surprise to those of you that have been reading Stuart and Euan’s excellent articles, I thought I would try and summarize the situation as I see it, and expand a little beyond the short summary paragraphs that Leanan is providing, to give more of an overall picture.

To begin you should know that when the Kingdom of Saudi Arabia (KSA) talks about the size of their oilfields, they refer to the amount of oil that was there at the beginning, rather than that which is left. You can do this calculation for yourself, but I exemplified it with a small calculation on the amount of oil that originally existed in the Abqaiq field , by making some simple assumptions.

Hmm! Maybe the next book review I’ll do will be “The Boy’s King Arthur.” Well actually, given the controversy about him (he was a Celt and they ultimately lost – after he died - so he has been relegated to mythical status. The winners write the history books), perhaps that might not be such a good idea. I recently looked at an NRC survey showing the classes of disciplines at a University and while history had more than 8 subdivisions as I remember, there was no mention of energy per se, or most of the energy production disciplines – so just imagine the columns of controversy I might generate. But it also speaks, by itself, to how important certain issues are ranked in the corridors of the mighty.

So let’s get back to the status of the world of oil. And while, as one of the recent conferees noted, the public thinks that, since prices having dropped back “we survived the energy crisis,” sadly the world picture is really getting worse. Sometimes, when I have looked at what we have projected, I have consoled myself with the thought to myself along the lines of “well these are the lower estimates, it really isn’t going to be that bad.” Unfortunately the numbers that are now starting to pop up hold no such comfort, and are beginning to confirm what our contributors have been predicting for a while.

Bless my socks! I had popped the Hel post into the hopper a couple of weeks ago, when I left, and am now back, although still trying to catch up on the information that was posted while I was away. One thing that has struck me, which related to the last post, has been the speed with which wind seems to be catching on as an alternate energy source. The NYT had a piece on the growth in India and China this past week (but since I was traveling I failed to tag it). And turbines are appearing when least expected, showing that the investment is now considered worthwhile.

By the same token, while driving around Poland we were, at least once, carried in a car powered by gas, and these are fairly common, though when our host said two million such, I am not sure if he was correct on the decimal point.

I listened to the recent interview with Matt Simmons and am not sure that I completely agree with one point that he made. In talking about production, he suggested that we had (as Khebab pointed out) reached a point where there has been some slight decline in production over the past months, and that this might signify that we have passed the peak.

Thanks to Matt for pointing to the Sydney peak Oil site where the latest Megaprojects list from Chris Skrebowski has been made available. This is an upgrade from last October and shows some fairly significant changes. I haven't finished reviewing all the projects yet, since he now carries the projections forward past 2010 in more detail, and has also included more OPEC information. The latter is due to a more open attitude from OPEC, and a more detailed list from them. Their site is worth a visit. As a result Chris's list, for example, has seven new projects for this year alone that were not on the last list. His numbers now also reflect the anticipated increased production from the Athabasca sands in Canada, and also NGL and condensate production that can be anticipated from mainly natural gas wells.

To give a very rough number his overall projected increase in production, if all the projects now scheduled come on line on time and at current targeted capacities, is that production will go up by something less than 1 mbd a year over his last projection. To put this in context, back last October, estimating a 5% decrease in existing well production, and an average of around 1.75 mbd of increased demand per year would give an annual shortfall in production of around 3.2 mbd relative to anticipated demand in each of the next four years. He had anticipated that oil demand for 2005 would be 83.5 mbd, increased demand would be 1.4 mbd, while there would be an increase in supply of 2.4 mbd, of which non-OPEC would provide 1.5 mbd. Depletion would be at 4.2 mbd.

Just over a week ago I posted the changing picture of the American gasoline stocks.  Here is the latest version thereof, and the picture has changed in direction.
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If one  further looks at the numbers that the EIA site provides. There is a slight discrepancy between the tabulated data and that plotted, and it took me a minute to realize that the curves are showing the rolling four-week averaged data, rather than the actual weekly for the imported gasoline data (and presumably also for the rest).  This is of significance since such an average, in this case with the changing situation, initially masks the fact that the imports for the past three weeks have gone from 0.938 to 1.207 to 1.423 mbd.  One may assume (at least I am) that about 500,000 bd of this is coming from the 20 mbd of gasoline that was put up by the IEA partners in response to our request following Katrina.  If this is the level of support that can be anticipated, then it will last some 40 odd days before that source is gone.