oil production outlook 2006 separating facts from fiction de waag, 1 november 2006, amsterdam
TRANSCRIPT
Oil production outlook 2006
Separating facts from fiction
De Waag, 1 November 2006, Amsterdam
• Terminology
• Current situation
• Production outlook until 2010
• Beyond 2010
• Discussion
Oil sits under pressure in the ground
Liquids production
• Conventional oil (light + medium crude oil - >20 degrees API)
• Unconventional oil ( heavy + extra heavy crude oil - <20 degrees API)
• Natural Gas Liquids
• Processing gains
• Biofuels / coal to liquids / gas to liquids (not included in this outlook)
Resources Total amount of oil in the ground
Reserves Recoverable amount of oil in the ground
Terminology
“The Canadian tar sands contain 1.8 billion barrels
of oil, seven times as much as the known reserves
of Saudi-Arabia. At least 300 billion barrels are
recoverable, 15% more then Saudi reserves.”
The world needs oil production flows!
Unconventional oil needs to be heated or
diluted before being produced. Production
has entirely different mechanisms/timelines.
Don’t compare apples with oranges
• Terminology
• Current situation
• Production outlook until 2010
• Beyond 2010
• Discussion
Why worry about oil prices and availability?
Source: Dutch Central Bureau for Statistics
Dutch consumption = 1 million barrels per day
23 %
41 %
Road transport
Air + Ship transport
25 % Industry
8%
3%
Energy production
Farming & Households
2001 - China joins the WTO
Steel prices double in three years
Source: World Watch Institute
Scramble for oil begins in 2002
Source: Cambridge Energy Research Associates
New price reality emerges
Source: IEA, EIA
• Terminology
• Current situation
• Production outlook until 2010
• Beyond 2010
• Discussion
Why I look at flows, not reserves
• TSHTF when flows can’t meet the required demand
• Reserve data is weak and usually biased• Reliable Middle East + Russian data remains undisclosed• Western data is unreliable due to financial rules instead of geological
• New project flows can be monitored
• Outright, visible, decline/depletion can be listed
• The demand that can be met established
Decline running at 4% or 5% annually
Source: International Energy Agency, ASPO Netherlands Database
4% - Demand / supply barely in balance
Source: ASPO Netherlands Database
5% - Demand destruction of 5 mb/d by 2010
Source: ASPO Netherlands Database
That’s only the theoretical scenario
• Project slippage (happens regularly)
• Increasing taxes/tighter terms (happening)
• Accelerating decline (happening)
• Upheaval in major producers (Iraq, Nigeria, Venezuela)
• Accelerating demand growth (China, India)
• Rig shortage >500 offshore rigs need to be replaced within 5 years
• “The big crew change” (half of the personnel will retire within 10 years)
What will the oil price do on the short term?
• Base price level of 50 – 75 dollars per barrel likely too conservative
• Superspike period (goldman sachs) >100 dollars per barrel
• Terminology
• Current situation
• Production outlook until 2010
• Beyond 2010
• Discussion
What do we need between 2010 - 2015?
Source: ASPO Netherlands Database
Present activity planned for 2010 – 2015:
• Conventional crude + NGL projects ~ 7 Mb/d
• Unconventional crude projects ~ 3 Mb/d
Divided by the largest increments :
• Saudi Arabia (1.5 mb/d), Iraq (1.3 mb/d), Iran (1.0 mb/d), Kazakhstan (1.0 mb/d), Canada (0.7 mb/d), Brazil (0.6 mb/d), Angola (0.5 mb/d)
We need another 10 Mb/d to keep production flat!
Don’t place your bets on meeting demand
Where is the oil discovery miracle?
Discoveries
• Peaked in the ‘60s
• Production > discovery since ’80s
• Discovery rate in last four years lowest since WWII
• 75% of conventional oil already found (USGS assessment)
Where are the ten annual “Jack” discoveries as promised by the
International Energy Agency?
Source: IHS Energy (Conventional crude oil + NGL)
Europe needs to find a new large supplier
Source: WoodMackenzie, International Energy Agency
Russia:
Past production 135 Gb
Current proven Reserves 74.4 Gb
Likely ultimate prod. of 250 Gb
IEA expectation:
Flat production until 2030
Ultimate of 300 Gb
There are warnings, but who is listening?
Amsterdam, 7 June 2006, World Gas Conference
Thierry Desmarest, CEO of Total oil company:
“The capacity of raising (oil) production is a real challenge ... if we stay with this type of production growth our impression is that peak production could be reached around 2020.”
“We say to governments, it's urgent to take action plans to reduce oil demand growth.”
Source: Reuters
Peak oil crisis can be solved
What’s on the horizon for transport• Super fuel efficient cars • Efficient and cheap electrical cars• 2nd generation biofuels (created using little energy)
The Netherlands could become the knowledge centre for high quality chemical products produced with biofuels
In the meantime, the world has to “tighten it’s belt” on moving products, food and people:
• Minimize long distant truck deliveries• Minimize transport by car• Maximize moving goods by water• Grow foods more regionally (within Europe)
