RE: Energy article from BBC news

> -----Original Message-----
> From: asa-owner@lists.calvin.edu
> [mailto:asa-owner@lists.calvin.edu] On Behalf Of Bill Hamilton
> Sent: Wednesday, July 28, 2004 7:48 AM
> To: asa@lists.calvin.edu
> Subject: Energy article from BBC news
>
>
> This articleappeared in BBC news yesterday.
>
> http://news.bbc.co.uk/1/hi/sci/tech/3930245.stm
>

Thanks for that Bill, This week has brought some interesting
developments. I won't go into the details but the Russian government
today told Yukos to cease selling oil. That is 20% of their output, 1.7
million barrels per day. Do a search on google news for Yukos for
details. Anyway oil went up a dollar a barrel. This will inhibit
investment in Russia (or should I say USSR again).

Anyway there were a couple of very interesting articles in the oil rags
this week. First an article by Ivan Sandrea, "Deepwater Oil Discovery
Rate may have Peaked; Production peak may follow in 10 years," Oil and
Gas Journal, July 26, 2004. This article pops the myth that the
deepwaters of the world will save us. The article notes that 1800
deepwater exploration wells were driled in 70 countries with about 50
billion barrels of oil discovered. But only four areas of the world's
deep waters account for nearly all of this. These areas are The Gulf of
Mexico, Brazil, Nigeria and Angola. Angola and Nigeria have only 9.5
billion barrels of reserves (18 weeks world supply), and 9.3 billion
barrels (16 week world supply) respectively. The entire 47 billion
represents only about a year an nine-month's world supply. We pump just
shy of 30 billion barrels per year.

The article notes that discoveries (measured in the number of barrels
found) peaked in the 1990s for the Big four countries. Peak deepwater
production will occur 2010 to 2011. Now, given the lack of exploration
success for the past few years, the number of wells drilled in the deep
water in the Gulf of Mexico has fallen from 109 in 2001 to 56 in 2003!
The author notes that the technology to drill in these water depths has
been around for a decade and with high profits for the oil companies, it
is not technology or cash that has constrained exploration. It appears
to be that there are few exploration opportunities. There are two
notable quotes:

"Even Greenland and the mountains of Tibet have been looked at for E&P
purposes." Ivan Sandrea, "Deepwater Oil Discovery Rate may have Peaked;
Production peak may follow in 10 years," Oil and Gas Journal, July 26,
2004 p.22

**
        "However, there is no indication to suggest that htree times the
amount of the oil discovered to date in the Big Four will be found again
in these provinces,and outside the Big Four, there is limited potential.
Global exploration potential looks now more limited than ever." Ivan
Sandrea, "Deepwater Oil Discovery Rate may have Peaked; Production peak
may follow in 10 years," Oil and Gas Journal, July 26, 2004 p.22

The other article puts a punctuation mark on the problem. If the
industry were busy drilling lots of deepwater wells, the one thing you
would need is drill ships. But another industry rag notes

"Although deepwater is the primary target for upgrades and newbuilds, no
drillships were launched in the past two years, and none of he
contractors has announced plans to add a drillship to its fleet in the
foreseeable future." Judy Maksoud, "More Rigs Head for Deepwater, "
Offshore, July 2004, p. 34

In other words, no one is building the equipment to drill in deepwater.
That means no one thinks the investment of 700 million dollars is worth
it. And that is really scary.

I think I mentioned earlier that we only have according to some
accounts, 600,000 bbl/d spare capacity in the world on a production rate
of 82.5 million bbl/d. That is, only .6 excess capacity on 82.5.
Demand for oil is expected to rise 1.8 million bbl/d next year. The
crisis I have been predicting for 5 years is almost here. Just another
couple of years and demand will far outstrip supply. God help our
children and grandchildren.
Received on Wed Jul 28 21:02:01 2004