RE: Life after the oil crash

Janet wrote:
 
I can see I'm in the wrong racket. As grifters like Gary North knows (laughing all the way to the bank), there's more money to be made off of the chicken-little kooks than just about anything else. LOL

I am not making any money off of this and I was publishing this before most of those who now are making money were. Thus, even if I am wrong, I believe what I am writing.
 
At the recent ASA convention in Pennsylvania, when talking to people at the conference, I began to be aware of a question that the site Burgy linked us to asked. Is it really possible to have compounding of income in an environment where every future month your sales will be less than the month before. If the world peaks out in oil production, I doubt that compound interest will work any longer. Here is what I wasn't going to post here. Janet, it is for free here, you didn't pay a cent for it.
So you can't impune MY motives.
 

Notes from the oil rags

Over the past few weeks several interesting articles have been published. The first thing that got my notice was some information about Mexico. I have written on Cantarell and its immanent impact on Mexican production. http://home.entouch.net/dmd/mexbrickwall.htm

 This field, is the 2nd largest in the world and last fall the Mexican officials said it would begin a production decline of 14% per year starting in 2006. But, there is a Mexican election at the end of 2006, so Pemex is about to do all it can to keep their production going. But, they will have their hands full

[cite=­David Shields,”Pemex Struggles to Keep Up Output,” Offshore, Sept. 2005, p. 32 ]“A major issue going forward will be the performance of Cantarell, Mexico's off­shore supergiant field. Cantarell accounts for 62% of the nation's total output and 74% of offshore output A recent Pemex report says, "Pemex's challenge is to maintain the production levels on Cantarell close to 2.0 MMb/d." The report, meanwhile, acknowl­edges that output from the field is expected to fall from 2.08 MMb/ d in 2Q of 2005 to 1.99 MMb/d in 2006, mainly due to well shut­ins. Cantarell output has already dropped by 64,000 bid year-on-year, down from 2.14 MMb/d in 2Q 2004.”

“A decline in Cantarell output is a given in 'coming years, yet it remains to be seen just how fast the decline will happen. For some time now, Pemex officials and documents have referred to a likely long-term decline, which could pull Cantarell output down to about 1.0 MMb/ d before the end of the decade. Pemex has produced 11 Bbbl from Cantarell over the past 25 years and expects to produce between 18 and 19 Bbbl from the field.”

     “Cantarell's decline could thus place a ma­jor restraint on Mexico'’ ability to maintain or step up output in future years, especially since Pemex has been making very few relevant new discoveries. Mexico’s oil reserves have been falling sharply for years now, and in recent years, proven reserves of crude oil from new discoveries have been replacing only about 7% of the oil produced.” [/cite]

They do have a few new fields coming on line, but they will not offset the expected decline in the world’s second largest field.

Iran has recently upped the reserves they claim, but like almost everything in the middle east, one has to doubt the reliability of the information.

     "In Iran, the national oil company recently raised proven crude oil reserves to some 132 billion bbl from the mid 90-billion bbl range, Mecray said, but most of the increase is in heavier oil. Because of Iran’s secretive nature, the legitimacy of such figures is in question."Hart's E&P Staff, "Middle East and Caspian nations can Help Meet Burgeoning Petroleum Demand by 2015, but Still won't Fill the Bill," The Future of the Energy Industry, Supplement to Hart's E&P October 2005, ed. by William Pike,, p. 15

Monday night I had dinner with a gentleman who had recently worked Kuwait. We got to talking about the future of energy production. He said, “I don’t mean to alarm you but Burgan has a fairly high water cut and it is getting higher.” Burgan is the 3rd or 4th largest field in the world and produces about 2.5% of the world’s oil. The next day I read this:

"'Kuwait has produced an average of 2.1 million b/d in recent years, he said, However, the Burgan field, Kuwait's biggest, is mature and making water, so the Kuwait Oil Co. (KOC) would prefer not to increase production from it, he added. With proper investment, however, increased drilling should raise production capacity to an average of 3 million b/d by 2015." Hart's E&P Staff, "Middle East and Caspian nations can Help Meet Burgeoning Petroleum Demand by 2015, but Still won't Fill the Bill," The Future of the Energy Industry, Supplement to Hart's E&P October 2005, ed. by William Pike,, p. 15

Mecray, the guy speaking about Kuwait above noted:

"Mecray said, these five countries under the most optimistic scenario, can account for only about 26 million of the additional 47 million b/d that will be needed to satisfy demand in 2015, which he calculates would be something like 104 million b/d."

        "So he concluded, the world will need 'to somehow destroy demand' by 2015. "We're going to have to replace liquid fuels with nuclear energy and coal and work on conservation,' he noted. 'In the meantime, add it all up and you still have a very strong demand for exploration and production around the world.'" Hart's E&P Staff, "Middle East and Caspian nations can Help Meet Burgeoning Petroleum Demand by 2015, but Still won't Fill the Bill," The Future of the Energy Industry, Supplement to Hart's E&P October 2005, ed. by William Pike,, p. 15

And for those who think higher taxes on oil and gas will solve our problem think again. Many countries have taxes that effectively place gasoline at the price of $250/bbl.

     "Higher energy prices simply aren’t causing significant drops in demand, Simmons said. During the past 10 years, he noted Europe, Japan, Australia and new Zealand all have been dealing with $250/bbl oil--even though much of it is paid in taxes--for their finished products. Nevertheless, he pointed out, such prices haven't stifled demand in those countries.

        "In Asia, he said, demand is skyrocketing, particularly in China. In 1993, he said, China had a total of 733,000 vehicles on the road. By the end of last year, they had exceeded 4 million. In march, there were record automobile sales of 252,000 vehicles, which annualizes to 3 million vehicles."

        "'If they add 3 million this year, that's 11 million,' Simmons remarked. 'And what's interesting is that it may be very difficult to go from 733,000 to 11 million vehicles in 11 years, but it's remarkably easy to go from 11 million to 30 million when you have 300 million people in just the coastal cities of china that would all like to drive a car.'" Hart's E&P Staff, "Longer-Term energy 'bull Market' a Certainty, Says on Analyst, while Another sees Prospects as much Bleaker," The Future of the Energy Industry, Supplement to Hart's E&P October 2005, ed. by William Pike,, p. 11

And China has every right to bring their standard of living up to that of the west so, what are we going to do?

glenn
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Received on Thu Oct 27 00:30:44 2005