Re: Energy Policy / Junk Science Environmentalism

Glenn wrote:

I thought you were dismissing what I say because of some imagined interaction Don Paul is supposed to have with government officials. I would bet I have more interaction with the government than Don does. Why? I am exploration manager for a country. In big companies, they isolate people and don't let a technical guy do government relations work. I have worked for ARCO and thus know what I am speaking of. I never saw a director of technology do anything with the government at ARCO. Everyone has their tiny niche and don't dare cross over. In smaller companies, one gets to do lots of things that one would NEVER get to do in a big company. In a big company I would never have been in charge of reservoir simulation but I was in mine.

First let me say that I dismiss little if anything of what you say on this peak oil topic. I accept your reasoning and assume that the data you present in support is accurate. I haven't found anything to quibble over in either respect. The difficulty I have is that top industry execs don't seem at all convinced that this apparently looming, obvious, imminent problem is a real problem. I cite Don Paul's views because I occasionally see him in person. I have known him for about 30 years and believe I can interpret his body language fairly accurately. As we (several of my former colleagues and I) watched him climb the corporate ladder, we concluded that his boss's views always shone through in what he said. As my Indian friend (who's had little affection for him over her entire career at Chevron) says from time to time, his ideas are "extracranial." So we don't expect him to be a fount of originality; but he's been an exceptionally quick study and--we're quite sure--he faithfully transmits his boss's opinions. His boss is now the Chevron CEO. (Don Paul may have slid back a bit in the hierarchy when Chevron bought Texaco to make room for a Texaco exec. I believe he used to be also VP for environmental affairs.) Furthermore, Don has testified at least once before the US Congress, so he is indeed sometimes assigned government duty.

When I asked Don about peak oil and the possible bad consequences, everything about his response--words and body language--indicated to me that he (and hence, I believe, also the CEO and I'm assuming also the consensus of the other Chevron execs--because they talk to one another) did not take these possible bad consequences seriously and was actually dismissive of said bad consequences. This puts my brain in a bind. How can these intelligent, well-informed people whose lives are oil not take this apparently looming problem seriously? It's hard for me to believe these hard-nosed guys are blind to the real world, so the next most likely explanation, it seems, is that they know things that are not available to the public. I don't really like this explanation either, but it’s a way of dealing with otherwise seemingly irreconcilable facts. Of course, as Al Koop has just pointed out, we may be dealing here primarily with a matter of conflicting time frames, where the industry execs are simply somewhat (or appreciably) more optimistic than you about the timing of the onset. Or can it be they're just so intensely focused on their immediate duties that they've lost perspective? But it's their job to gain and maintain perspective.

Don

  ----- Original Message -----
  From: glennmorton@entouch.net<mailto:glennmorton@entouch.net>
  To: 'Glenn Morton'<mailto:glennmorton@entouch.net> ; 'Don Winterstein'<mailto:dfwinterstein@msn.com>
  Cc: 'asa'<mailto:asa@calvin.edu>
  Sent: Monday, December 19, 2005 3:40 AM
  Subject: Re: Energy Policy / Junk Science Environmentalism

  On Mon Dec 19 2:47 , "Don Winterstein" sent:

    Glenn,

    "There are those who seem to think that if w:st="on">US when prices went from $2 to $32 in 10 years)."

    I don't have data, but I recall back in the '70s that lots of small stripper operators were about to shut in wells because they didn't pay their way; but when the price went up, they changed their minds, kept them going and even enhanced production where feasible. What you say makes it sound like their contributions were negligible. <<

    GRM: What makes me say it was negligible was the graph of lower 48 production. See http://www.hubbertpeak.com/blanchard/images/Image1.gif<http://www.hubbertpeak.com/blanchard/images/Image1.gif>

    GRM:Look at the little flat area from 1980 to 1985. That is what those stripper's (wells that is, not fancy dancers) did for us. Note that they didn't increase the production they just staved off the decline. I would also tell you to go get the production data from fields in the North Sea and see that the big fields like Ninian and see how the production is a fraction of the peak production. http://www.hubbertpeak.com/blanchard/images/Image7.gif<http://www.hubbertpeak.com/blanchard/images/Image7.gif>

    GRM:If technology was going to save our cookies, why on earth isn't it working at an old field like Ninian? I worked on Ninian for a while. There was more potential there, but it was decidedly small potatoes compared with what it used to be. And when the field is finally abandoned, there will still be about 60% of the original oil left there. The laws of capillary pressure will not permit us to move it to market.
    Go see this for an old but still valid analysis.
    http://www.hubbertpeak.com/blanchard/<http://www.hubbertpeak.com/blanchard/>

    GRM: I would also say you need to see a plot of WEst Texas production, which is largely stripper production. It too is a fraction of its former self. TEchnology has not lifted the production to high levels of yesteryear. If you can find one field where technology took an old field and brought it back up to even 50% of it's former production I will confess I am wrong. I have never seen this happen unless a new deeper pool was found but that isn't the same thing as technology rejuvenating a nearly tapped out reservoir.

     Don:
    I'm more familiar with the heavy oil situation in the San Joaquin valley: During my career the company oscillated from time to time between considering shutting in the whole operation on the one hand and drilling hundreds of new wells per year on the other hand. (There's something like a billion barrels of heavy oil in the Cymric field alone, if I remember correctly; but it's expensive to produce.) The oscillations were driven by the price of oil and technological developments. I have no idea how big a contribution such decisions might make when summed across the whole country, but there must be tens of thousands of oil wells in play here. Why wouldn't they make a detectable difference? Also, everybody knows there's a mad rush to generate more production when prices rise. Much of this will be in small quantities, but the little bits add up. Small companies can profitably produce small fields, especially when prices are high; and there are probably lots of small fields still out there to be found and exploited.

    GRM: What drives that is economics, which is largely governed by price, not the absolute quantity of oil produced. THey don't make a detectable difference because the bits and pieces are far too small. As to Cymric field and other California heavy oil fields, like Midway Sunset, they are so energy intensive (steam flooding) that their economics are always marginal. The oil also sells for a huge discount off the NYMEX.

    Don: And, OK, I agree it's not nice of me to belittle the mid-size oil companies--if that's what you think I was doing. : ) But they typically didn't fund their own research, so while I was in the industry they were largely off my radar screen.

    GRM: No, I thought you were dismissing what I say because of some imagined interaction Don Paul is supposed to have with government officials. I would bet I have more interaction with the government than Don does. Why? I am exploration manager for a country. In big companies, they isolate people and don't let a technical guy do government relations work. I have worked for ARCO and thus know what I am speaking of. I never saw a director of technology do anything with the government at ARCO. Everyone has their tiny niche and don't dare cross over. In smaller companies, one gets to do lots of things that one would NEVER get to do in a big company. In a big company I would never have been in charge of reservoir simulation but I was in mine.

    GRM:As to research, almost no one in the oil industry is investing major dollars in research anymore. I saw a presentation by of all people, a US deputy Secretary of Commerce on research in the oil and gas industry. Today as an industry we invest on a per dollar sales basis, slightly more than soft drink manufacturers (like Pepsi) and slightly less than cigarette manufacturers. Why? Profit margins in the 1990s were so bad something had to give. Today the people who are doing research in the oil industry are the vendors, not the oil companies. In the 1990s we didn't have the money for it, indeed, we laid people off by the bucket load because we didn't have money for salaries either.
Received on Tue Dec 20 03:58:49 2005