There are several items which I have run into over the past few weeks which
point to the future problems in the oil industry. First, Venezuela, one of
the US's main suppliers. The Wall Street Journal notes of Venezuela's output
capacity that 3 years ago it was 3.7 million barrels per day (bopd) and has
fallen to 3 million bopd last year. This year it is expected to fall
another 200,000 BOPD:
"The reason for the shrinking capacity: a paucity of investment needed to
offset the sharp depletion rates in the couthtry's oil fields, particualrly
the well-exploited fields in the country's west. Some of PDVSA's wells have
been working since the first gusher came in near Lake Maracibo in 1914.
Alirio Parra, a former Venezuelan oil minister, says the country's output
capacity--assuming no further investment--is declining by as much as 25%
annually, compared with around 5% for the big fields in the MIddle East. To
maintain Venezuela's current output capacity, PDVSA must find 750,000
barrels a day of production every year." Bhushan Rahree and Marc Lifsher,
"The Other Crisis Facing Venezuela," Wall Street Journal, April 18, 2002, p.
A9
Finding the quantities of oil cited above is almost mission impossible
today. They are finding what they are by finding small fields and given the
200,000 bopd decline projected for this year, means that they are expected
to only add 550,000 bopd, which is a major feat in and of itself. Investment
will be difficult because the next day the Wall Street Journal reported:
ìIn the wake of a blink-and-you-missed-it coup against President Hugo
Chavez last week, the International Monetary Fund yesterday lowered its
outlook for Venezuelaís economy this year: it now expects a contraction of
0.8%, against growth of 1.8%. Many private economists are even more bearish.
Orlando Ochoa, of Andres bello Catholic University here, projects a
contraction of 2% to 3%.î Pamela Druckerman and Marc Lifsher, ìChaos in
Caracas Likely to Depress Nationís Fortunes,î Wall Street Journal April 19,
2002, p. A11
ìEconomists and investors are particularly worried that the
central Bankís
foreign reserves have shrunk 10.8% to $15.1 billion since January, as
nervous Venezuelans convert their bolivars into dollars and send the money
abroad.î Pamela Druckerman and Marc Lifsher, ìChaos in Caracas Likely to
Depress Nationís Fortunes,î Wall Street Journal April 19, 2002, p. A11-A12
Now there are some dark clouds politically concerning our relations with the
Middle EAstern countries. Today on Yahoo I ran into this concerning the
Saudi view of the US-Saudi relations:
"It is a mistake to think that our people will not do what is necessary to
survive," the person close to the crown prince said, "and if that means we
move to the right of bin Laden, so be it; to the left of Qaddafi, so be it;
or fly to Baghdad and embrace Saddam like a brother, so be it. It's damned
lonely in our part of the world, and we can no longer defend our
relationship to our people."
http://story.news.yahoo.com/news?tmpl=story&u=/nyt/20020425/wl_nyt/saudi_to_
warn_bush_of_rupture_over_israel_policy&printer=1
NOw the Saudi's have their own problems which complicate their decision to
use the oil weapon. First they own some refineries in the west which would
be hurt by such an embargo. OPEC's market share is down to 40% so they don't
have the leverage they used to. (Irwin Stelzer, ìSaudis Need Us More than We
Need Their Oil,î The Sunday Times, March 17, 2002, Business, p. 4). THey
also own treasury bills. Second, they need money desparately because 1/3 of
their young men are unemployed. They have been in the process of negotiating
gas production agreements with western oil companies, but over the past
year, the Saudis suddenly stopped or slowed the pace of the negotiation. The
Wall Street Journal says,:
ìPeople close to the Saudis say they have too much at stake
to let the gas
initiative die, especially with the kingdomís population growing 3.5%
annually and nearly a third of its young men joubless. Whatís more, the
country expects a nearly $12 billion budget deficit this year, even though
it has cut spending by 20%.î Bhushan Bahree and Thaddeus Herrick, ìTalks
Between Saudis, Oil Companies Falter,î Wall Street Journal, April 22, 2002
p. A15
Given the earlier statement, it may very well be to the Saudi ruler's
interest to turn the anger of the people away from them and towards the US.
If this wins out, then it won't matter that they hurt their own refineries
or US treasury bonds.
Then a major field in China is showing its age. Daqing is really a
conglomeration of fields over a very large area. It has been producing more
than 50 million tonnes (385 million barrels) per year 1.05 million bopd for
the past 26 years. (http://www.gasandoil.com/goc/news/nts20400.htm)
ìWang Zhibin, the mayor of Daqing, quoted in the state media this month, put
the problem in stark terms. One problem, he said, was that Daqingís ageing
wells would this year produce 1.5m tonnes of crude less than they did last
year. Another was that crude oil prices were falling in line with those on
the international market.î James Kynge, ìProtests by Workers Worry Chinaís
Premier,î Financial Times, March 16, 2002, p. 9.
If this decline continues, then this field will leave the million bopd club
in 2 years. This field is one of only 4 fields in the world which produce
more than 1 million barrels of oil per day. The others are Ghawar, Saudi
Arabia discovered in 1948, Cantarell in Mexico discovered in 1976 and Burgan
in Kuwait discovered in 1938. These 4 fields produce about 1/10 of the
total oil used each and every day by the world. All are old, and all but
Cantarell are declining.
And then there is Indonesia. This says it all.
"Indonesia is in the midst of major difficulties. In steady
retreat since
1996, production was down again in 2000, to 1.43 million b/d (-10%). This
decline is expected to persist in 2001, with supply standing at about 1.3
million b/d. In the event that production continues to fall, Indonesia would
no longer be a net exporter and would have to leave OPEC within the next
four or five years." Armelle Saniere, Colin Baudouin, Bernard Bensaid and
Sebastien Fraysse, "How the 2002 Business Environment for Oil and Gas
Exploration has developed around the World," First Break, 20(2002):2:80-87,
p. 87
All of this represents a bad moon rising on the future. Russia will help a
bit in the near term but it is highly doubtful that they will be able to
fill the gap.
glenn
see http://www.glenn.morton.btinternet.co.uk/dmd.htm
for lots of creation/evolution information
anthropology/geology/paleontology/theology\
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