2007 PEAK OIL AND ENERGY CRISIS NEWS ARCHIVES

2007

"Gazprom, it turns out, has too many customers, and too little gas. The surprising Achilles' heel of Gazprom is that it produces only about 550 billion cubic meters (bcm) of gas—just enough to supply its own domestic market. It relies on cheap imports from to meet the majority of its other commitments to customers in Europe, amounting to nearly 80bcm. And since only Gazprom's foreign customers pay full market value, it's the company's exports which make up the bulk of Gazprom's revenues—$21 billion for the second quarter of 2007 alone. Now those nations on which Gazprom's profits rely—including Turkmenistan, Uzbekistan and —are beginning to cut their own deals with big new customers like . The deals are in turn becoming an existential threat to Gazprom, one of 's most valuable strategic levers of power. Russian control of a quarter of Europe's gas supplies is a key plank of its foreign policy and renewed national pride; supply of cheap electricity and heat to Russian homes is a touchstone of the Russian government's credibility. Central Asia is now undermining both those fundamentals—and could threaten Vladmir Putin's petro-politics. Gazprom hasn't opened up a new gas field since 1991, and its existing fields are dwindling. A recent report by the Russian Industry and Energy Ministry warned that if the decline continued, Russia may be unable to service even its own domestic gas needs by 2010, and recommended doubling prices, a conservation move that has upset business and could also put a damper on economic growth. Meanwhile, Gazprom chairman Dmitry Medvedev—also first deputy prime minister and Vladimir Putin's anointed successor for the next presidential elections in March 2008—has announced a radical plan to revive the company's domestic production, investing $420 billion in exploration and new gas-production facilities. No threat is more potent than that of China's move into Turkmenistan. Last year China's President Hu Jintao signed a deal with the late Turkmen leader Sapurmurat Niyazov to buy 30bcm of Turkmen gas each year for the next 30 years, and finance a giant new gas pipeline to China's Xinjiang province."
Russia’s Big Energy Secret
Newsweek, 22 December 2007

"The peak oil theory claims that the world is depleting crude at 30 billion barrels each year, but adding just 10 billion in discoveries. Depletion is running at 4% a year, according to official numbers. However, statistics from the Middle East are in question, and peakists believe the depletion rate is closer to 6%. China's annual demand is growing at 0.4 million barrels per day (bpd). It may reach 8 million next year, or 9% of world output. Reports claim that China will see domestic oil production peak as early as 2015 with an annual output of 190 million tonnes."
Peak oil rapidly approaching, oil sands still waiting in the wings
Resource Investor, 17 December 2007

"We think that production has been peaking the last two or three years. It reached a peak, basically, in 2004 - that's why oil prices started rising - and the actual physical peak of total crude oil, gas liquids, and the synthetics, we think will probably occur in 2008. That some of these, remember these big, new non-OPEC production projects - Deep Water U.S. Gulf, Deep Water Brazil, and so on - that were expected to come on this year will be coming on next year. We may have an increase of 800,000 to a million barrels a day in total non-OPEC production next year as a consequence. We think that will be the all time total peak - it'll just be a little blip upward. And from then on, irreversibly slowly declining....of the order of 25% of all of the oil that is used is used solely to provide heat to generate steam for industrial operations or to generate electric power. And for that use there's much cheaper oil alternatives than the equivalent of $65-85 oil - in the form of coal and natural gas and nuclear - and that that fuel oil being burned for that low value use will be converted in refinery expansions which are being made now - convert that fuel oil to transportation fuel. After that has all been substituted, then, and most of the oil is being used for the high-value, special quality uses - transportation, raw material and home heating - it will require a higher price level to restrain consumption, and that's - we haven't done that work yet - but that's over this $65-85 a barrel range. And, during the next several years, it'll become clearer what level that may have to be - probably $85-100 plus....we have found that instead of growing at a historical rate of 2.5% a year, consumption has actually been essentially flat for three years because we've had prices in the $60-70 a barrel range. So, if we - we've eliminated all growth in consumption at the $60-70 range - if prices are above that, consumption - based on all the results we're seeing - will continuously decline."
Henry Groppe: IEA to blame for $100 oil spike
Global Public Media, 16 December 2007

"'An unexpectedly large jump in consumer prices last month suggested inflationary pressures haven't receded, and the Federal Reserve may have less latitude than markets believe to lower interest rates to cushion the economy. 'This is a much tougher monetary-policy environment than anything I experienced,' former Fed Chairman Alan Greenspan said in an interview Friday... Economists and the Fed have typically judged inflation trends by the core, not the overall, rate; food and energy prices, while highly volatile, don't tend to rise faster or slower than other prices over time. But Mr. Greenspan said that's no longer the case. 'The notion of core pricing is fading in importance as: One, food prices driven by increased long-term demand for meat and milk rise with the growth of China and other developing countries, and as; Two, global oil supply peaks lower and sooner than had been contemplated earlier,' he said."
How Inflation Hobbles the Fed
Wall St Journal, 15 December 2007

"Booming demand for energy from China and the Middle East will drive global oil consumption up 2.5 per cent next year despite the growing threat of a recession in America, according to the International Energy Agency (IEA). The Paris-based energy watchdog said yesterday that it expected global crude oil demand to grow by 2.1 million barrels a day in 2008, 200,000 barrels a day higher than its previous forecast. Demand next year is now expected to reach 87.8 million barrels per day, the report said. The revised IEA forecast contrasted starkly with predictions also made yesterday by the Organisation of Petroleum Exporting Countries (Opec) for growth of just 1.3 million barrels per day next year. The IEA, adviser on energy issues to 27 industrialised countries, brushed aside Opec’s claims that a slowdown in America, the world’s biggest economy, would trigger a slump in global crude demand. Its report emphasised the likelihood of continued robust demand from developing countries. 'Mature economies are only supporting actors in our global demand growth projections,' the IEA said. 'The bulk of 2008 demand growth remains within nonOECD countries, where regional growth patterns are expected to be similar to the past two years.'”
Buoyant China expected to lead growing demand for oil
London Times, 15 December 2007

"Although there is a huge amount written about the oil market, what is genuinely supporting the price of oil are the fundamentals. There is not enough spare capacity in the world and there has been increasing demand from certain areas, notably the U.S., China and India. This is not the fault of OPEC; it is not the fault of 'speculators'; it is not the fault of 'terrorists' and Middle Eastern governments. It is structural, it is the onset, however you see it coming - and this column does not think it is geological as such - of a peak in global oil production. Whether the peak is at the current figure of 85 million barrels per day or can sneak up to 95 million barrels per day over the next decade is neither here nor there. In historical terms we are on the cusp."
Peak Oil Passnotes: On the Cusp
Resource Investor, 14 December 2007

"The economies of many big oil-exporting countries are growing so fast that their need for energy within their borders is crimping how much they can sell abroad, adding new strains to the global oil market. Experts say the sharp growth, if it continues, means several of the world’s most important suppliers may need to start importing oil within a decade to power all the new cars, houses and businesses they are buying and creating with their oil wealth. Indonesia has already made this flip. By some projections, the same thing could happen within five years to Mexico, the No. 2 source of foreign oil for the United States, and soon after that to Iran, the world’s fourth-largest exporter....'It is a very serious threat that a lot of major exporters that we count on today for international oil supply are no longer going to be net exporters any more in 5 to 10 years,' said Amy Myers Jaffe, an oil analyst at Rice University. Rising internal demand may offset 40 percent of the increase in Saudi oil production between now and 2010, while more than half the projected decline in Iranian exports will be caused by internal consumption, said a recent report by CIBC World Markets. The report said 'soaring internal rates of oil consumption' in Russia, in Mexico and in member states of the Organization of the Petroleum Exporting Countries would reduce crude exports as much as 2.5 million barrels a day by the end of the decade....Fatih Birol, chief economist at the International Energy Agency in Paris, rated consumption growth among oil exporters as the second-biggest threat to meeting the world’s oil needs. 'It’s a big problem, and growing all the time,' Mr. Birol said. Internal oil consumption by the five biggest oil exporters — Saudi Arabia, Russia, Norway, Iran and the United Arab Emirates — grew 5.9 percent in 2006 over 2005, according to government data. Exports declined more than 3 percent. By contrast, oil demand is essentially flat in the United States. CIBC’s demand projections suggest that for many oil countries, including Saudi Arabia, Kuwait and Libya, internal oil demand will double in a decade. Factors contributing to the trend include increased industrialization, higher government spending and increasing personal consumption. According to a World Bank report, economic growth in the Middle East and North Africa has doubled since the 1990s, and Russia has done even better."
Oil-Rich Nations Use More Energy, Cutting Exports
New York Times, 9 December 2007

"Shell, the oil company that recently trumpeted its commitment to a low carbon future by signing a pre-Bali conference communique, has quietly sold off most of its solar business. The move, taken with rival BP's decision last week to invest in the world's dirtiest oil production in Canada's tar sands, indicates that Big Oil might be giving up its flirtation with renewables and going back to its roots. Shell and BP are among the biggest producers of greenhouse gases in the world, but both have been keen to paint themselves green through a series of clean fuel initiatives."
Big Oil lets sun set on renewables
Guardian, 11 December 2007

"BP is planing a return to the booming but environmentally controversial Canadian tar sands business with the creation of two joint ventures with Husky Energy worth an estimated $10 billion (�4.9 billion). Eight years after disposing of its assets in the region, BP said that it had bought a 50 per cent share in Husky’s Sunrise tar sands project near Fort McMurray, Alberta, and at the same time had sold Husky a 50 per cent share in its Toledo refinery in Ohio. The announcement represents a clear break with the past for Tony Hayward, BP’s new chief executive, whose predecessor Lord Browne of Madingley was an outspoken critic of costly oil sands developments. He sold off BP’s interests in Alberta in 1999, opting instead to focus on higher-risk but higher-return investments in countries such as Russia."
BP upsets Greenpeace with $10bn return to tar sands
London Times, 6 December 2007

"In a report published in by the United States National Academy of Sciences journal today, David Zhang, of Hong Kong University, has analysed a half millennium's worth of human conflict — more than 8,000 wars.... 'We are on alert, because this gives us the indication that resource shortage is the main cause of war.'"
Water shortages are likely to be trigger for wars, says UN chief Ban Ki Moon
London Times, 4 December 2007

"Congressional Democrats reached a compromise late Friday to boost automobile fuel economy by 40 percent, clearing the way for a House vote probably next week on an energy bill that Democratic leaders would like to send to President Bush before Christmas. The agreement came after House Speaker Nancy Pelosi reached an accord with Rep. John Dingell, D-Mich., a longtime protector of the auto industry that dominates his home state, to ease the impact of the new fuel economy requirements. 'A compromise has been reached on automobile fuel efficiency standards,' Dingell announced in a statement. Automakers would be required to meet an industrywide average of 35 miles per gallon for cars and light trucks, including SUVs, by 2020, the first increase by Congress in car fuel efficiency in 32 years."
Democrats Reach Deal on Energy Bill
Associated Press, 30 November 2007

"China is running out of fuel. Police are guarding petrol stations in several inland provinces to prevent fights, as shortages of petrol and diesel are causing huge queues of trucks, buses and cars."
Chinese tiger has nothing in tank
The Australian, 28 November 2007

"China urged local governments to set up an early warning system to ensure sufficient oil supplies at filling stations, which face shortages across the nation, the state-run Xinhua News Agency reported. The Ministry of Commerce ordered local authorities to monitor oil supplies and work out measures to cope with emergency shortages, Xinhua said yesterday. The report didn't elaborate on requirements for the warning system."
China Calls for Warning System to Ensure Oil Supplies
Bloomberg, 25 November 2007

"What better evidence of the daunting challenge that oil shale presents: Shell Frontier Oil & Gas, seen as the leader in the quest to free millions of barrels of oil in massive rock formations in a three-state area, doesn't expect to start commercial production any time soon. The company has been researching ways to tap the vast resource for more than a quarter century and has been running tests since 1996 on private land amid the sagebrush-covered hills and pinon pine and juniper forests of northwestern Colorado. And yet in July, Shell withdrew a state mining permit to start work on a federal research and development lease granted by the Bureau of Land Management. 'There were a myriad of factors,' Shell spokesman Tracy Boyd said. One was ongoing research and testing. The results could change what Shell will ask for in its permits for work on three 160-acre parcels of federal land approved by the BLM for demonstration projects. What isn't changing, Boyd said during a recent tour of Shell's research site, is the company's belief that the oil shale formations under western Colorado, eastern Utah and southwest Wyoming could help meet the nation's growing demand for energy....Federal and industry estimates peg the amount of oil trapped in the rocks from about 1 trillion to 1.8 trillion barrels, or three times the proven reserves of Saudi Arabia. Of that, roughly 800 million barrels are considered recoverable. The catch is extracting the oil from the rock, something that's been tried on and off for nearly a century. The shale, or kerogen, is a precursor that wasn't buried deeply enough or naturally processed long enough to complete the transformation to oil. Turning the shale to oil requires heating it: above ground after mining or, as Shell has done, in the ground, a process called in situ — 'in place.' 'There's talk about being the Saudi Arabia of oil,' said Jeremy Boak, project manager at the Colorado Energy Research Institute based at the Colorado School of Mines in Golden. 'It's probably never going to be the Saudi Arabia of oil shale production rates.' Significant commercial production could be 10 to 20 years away, Boak said. But if the economic, technical and environmental issues can be resolved, he said, oil shale could help bridge the gap until renewable or alternative energy becomes more common."
Oil shale won't impact fuel markets for decades
Associated Press, 22 November 2007

"A peak oil output of 1 million barrels a day at the ultra-deep Tupi field in Brazil's Santos Basin is 'not out of reach,' the chief financial officer of state-run oil firm Petroleo Brasileiro SA (PBR), or Petrobras, said Wednesday. The field, which is in the promising pre-salt area off Brazil's coast, could reach its peak output as early as five to seven years from now, CFO Almir Barbassa said. He spoke at the annual conference of the Latibex exchange of Latin American companies traded in Madrid. Barbassa said it's too early to tell exactly what Tupi's peak output will be and when it will be reached. Currently, the company is able to make only rough estimates and cannot give exact production targets for the field, he said....Petrobras said Oct. 8 it estimates oil and gas reserves at Tupi at between 5 billion and 8 billion barrels of oil equivalent, or BOE, making it Brazil's largest ever discovery. The latest discovery lies a considerable seven kilometers below sea level: the water depth is around 2,000 meters, followed by 3,000 meters of rock and sand below the seabed, and then a further 2,000 meters through a layer of salt....Gabrielli last week also said that Tupi production will 'very likely' top 200,000 BOE a day. Pilot production at the field may start in 2010-2011 at around 100,000 BOE a day. Wood Mackenzie analyst Matthew Shaw recently also said production at Tupi could peak at around 1 million barrels, but expects the field's output to peak only by 2022. He calls Tupi 'one of the most significant oil discoveries in the last 20 years,' only surpassed by the 12.9-billion-barrel Kashagan field found in Kazakhstan in 2000."
Petrobras CFO: 1M b/d from Tupi 'Not Out of Reach'
Dow Jones Newswires, 21 November 2007

"A growing number of oil-industry chieftains are endorsing an idea long deemed fringe: The world is approaching a practical limit to the number of barrels of crude oil that can be pumped every day. Some predict that, despite the world's fast-growing thirst for oil, producers could hit that ceiling as soon as 2012. This rough limit -- which two senior industry officials recently pegged at about 100 million barrels a day -- is well short of global demand projections over the next few decades. Current production is about 85 million barrels a day.... The new adherents -- who range from senior Western oil-company executives to current and former officials of the major world exporting countries -- don't believe the global oil tank is at the half-empty point. But they share the belief that a global production ceiling is coming for other reasons: restricted access to oil fields, spiraling costs and increasingly complex oil-field geology. This will create a global production plateau, not a peak, they contend, with oil output remaining relatively constant rather than rising or falling. The emergence of a production ceiling would mark a monumental shift in the energy world. Oil production has averaged a 2.3% annual growth rate since 1965, according to statistics compiled by British oil giant BP PLC. This expanding pool of oil, most of it priced cheaply by today's standards, fueled the post-World War II global economic expansion.... Most of the world's biggest fields are aging, and production at them is declining rapidly. So, just to keep global production at current levels, the industry needs to add new production of at least four million daily barrels, every year. That need is roughly five times the daily production of Alaska, with its big Prudhoe Bay field -- and it doesn't assume any demand growth at all....Soaring energy prices have breathed new life into projects targeting 'nonconventional' oil, such as that trapped in sand or shale. But these sources can't be tapped nearly as quickly or inexpensively as the big oil finds of the past....As these uncertainties mount, there is growing hope that Saudi Arabia, which has about 20% of the world's oil reserves, would ride to the rescue if needed. Saudi Aramco, the national oil company, has embarked on an ambitious plan to increase its daily production by 30%, or three million barrels, early next decade, and thus reclaim the title of top producer from Russia. But Mr. Al Husseini, the former Saudi oil executive, now an independent consultant, said others aren't doing as much, leaving the world entirely dependent on Saudi Arabia to provide extra capacity. 'Everyone thinks that Saudi Arabia will pull us out of this mess. Saudi Arabia is doing all it can,' he says in an interview. 'But what it is doing, in the long run, won't be enough.'"
Oil Officials See Limit Looming on Production
Wall St Journal, 19 November 2007

"An Opec summit - only the third in the cartel's history - concludes in the kingdom today, and the Saudi government is keen to show off the flagship project to the world. Last week, it flew in more than 100 foreign journalists. Yet in the heart of the empty quarter to the south, Shell and other oil majors are searching in vain for new deposits. The Saudis opened up the region to overseas exploration in the 1990s when oil prices were barely in double figures. The empty quarter was hailed as one of the few big opportunities for the majors to get a foothold on the world's largest oil producer. Yet so far the appraisal wells have come up dry. No journalists were flown out to visit this particular area last week. 'Whether that's a sign the Saudis don't have as much oil as they say they do, we just don't know,' says Samuel Ciszuk of analyst Global Insight. The trip to Shaybah is part of a carefully choreographed public relations offensive to convince the world the Saudis can keep it supplied. 'Saudi Arabia is desperate to say they have things under control,' says Ciszuk...This month, the normally conservative International Energy Agency warned that the world faces an oil supply crunch over the next decade. It said that Opec, which currently produces about 40 per cent of the world's oil, will have to provide all of the one-third increase in global demand forecast by 2030 because production in non-Opec countries has peaked. Much of this burden will fall on Saudi Arabia. For the US in particular, the prospect of becoming even more reliant on Opec members like Saudi Arabia - with which relations are cooling - and Iran and Venezuela is unattractive. With developing nations' thirst for the black stuff showing no signs of abating, it's no wonder prices are poised to break the $100 mark."
Can Saudi square the oil circle?
Observer, 18 November 2007

"Next year, Saudi Aramco, the state oil company, plans to boost production by 250,000 barrels a day, one step in an effort to expand the kingdom's oil-production capacity to 12.5 million barrels a day from the 11.3 million barrels. The new production is part of a strategy that could ease market tension and is designed to preserve Saudi Arabia's ability to produce 1.5 million to 2 million barrels a day more than its actual output in the face of rising world oil demand, said a senior Saudi Oil Ministry official who spoke on condition of anonymity..... This field, Shaybah, was discovered in 1968. Thirty years later, technological advances that permit oil rigs to drill horizontally as well as vertically enabled Saudi Aramco to start exploiting the field by putting the rigs on stable salt flats and drilling under 500-foot dunes rather than through them. The kingdom is considering adding more production later. It isn't only the size of the Shaybah expansion that matters. It's the oil's extremely high quality. Most of the spare oil production capacity in Saudi Arabia is much thicker, lower-quality crude with high sulfur content, which relatively few of the world's refineries can handle. Although most of the new Saudi production that will be brought in over the next year is high-quality oil, later production increments will be forced to tap the kingdom's heavier crude reserves, Saudi Aramco said. To increase the market for those crude grades, Saudi Arabia is building or expanding refineries so that they will be able to process Arab heavy as well as Arab light crude oils.... This week, Saudi Oil Minister Ali al-Naimi reiterated pledges that Saudi Arabia would eventually deliver 1 million barrels of oil a day to China and keep the world well supplied. Some analysts said that could be difficult because many of Saudi Arabia's oil fields are old and in decline. The rate of natural decline in Saudi fields was slightly faster than anticipated this year, according to a Saudi strategist who spoke on condition of anonymity because he is not authorized to speak publicly on the subject. From 2005 to 2009, output from existing Saudi fields is expected to decline by 800,000 barrels a day. But Saudi Arabia's output capacity is about the same as it was 30 years ago."
Saudi Arabia Works the Vast Desert To Pump Out More High-Quality Oil
Washington Post, 17 November 2007

"Rising costs will temper production growth from Canada's vast oil sands, the country's national energy regulator forecast on Thursday, as it detailed its expectations for Canadian energy production over the next two decades. The National Energy Board expects production from the oil sands to rise to about 2.8 million barrels a day by 2015 from about 1 million barrels a day last year. The new estimate is down 200,000 barrels a day from a forecast the NEB released just last year because of the massive cost increases and labor shortages that have plagued major projects in the region. The forecast was cut 'in view of the rapid escalation of costs,' Bill Wall, an oil market analyst at the regulator, told reporters.... freeing the tar-like bitumen trapped in the sand and upgrading it to refinery-ready synthetic crude is technically challenging and expensive. New projects to tap the resource have all faced blown budgets. Most recently, Canadian Natural Resources Ltd said last month that its 110,000 barrel per day Horizon oil sands project was nearly C$1 billion ($1.02 billion) over budget, at C$6.8 billion, with less than a year left before work is complete. The NEB's study, a forecast of national energy supply and demand to 2030, said oil sands construction costs have risen 40 to 50 percent over the past two years as producers cope with higher steel and concrete costs, a shortage of engineers and skilled labor, and strained provincial infrastructure. The cost of adding a new barrel of synthetic crude production capacity now ranges between C$80,000 and C$100,000 a barrel. Those costs may also rise as governments move to restrict greenhouse-gas emissions, while profits are squeezed by tax hikes and the strengthening Canadian dollar. 'These challenges have slowed the pace of activity somewhat and a number of companies are reassessing the economics of their projects,' the regulator's report said."
Canada regulator says oil sands rush may slow
Guardian, 15 November 2007

"The key reason for Opec’s loss of control is the fact that its spare capacity, which acts as a buffer against unexpected events such as hurricane damage to oil platforms in the Gulf of Mexico or a jump in oil demand triggered by a cold snap, collapsed to a record low in 2004 and has barely recovered since. The cartel’s buffer dropped to just 1m b/d in 2005, down from about 5m b/d in 2002, according to estimates by the US energy department. During the late 1980s, Opec’s spare capacity stood at almost 10m b/d. To aggravate the problem, most of the spare capacity is now concentrated in low-quality heavy, sour oil, for which refining capacity is very limited. That means that the world petroleum market has no margin for error. Bassam Fattouh, of the Oxford Institute for Energy Studies, says that when the majority of Opec members produce at or close to their maximum capacity, the cartel has no influence on oil prices. ... At this weekend’s summit, Opec heads of state will stress that the group is investing to resolve the problem..... However, doubts about the plans are helping to keep the oil price high. While Opec promises a huge increase in its capacity, above what demand would probably require, it is unlikely that all the plans will ultimately be realised. The Saudi projects look likely to be on-stream on schedule but many in Venezuela, Iran, Iraq and Nigeria have rather less chance of materialising, according to industry analysts.Mr Naimi acknowledges that the investment situation in a number of Opec countries, including Iraq and Iran, is 'difficult' but says that the 'willingness' to invest is there. However, the IEA is also worried about the 'willingness and ability of the national oil companies to increase installed capacity once the projects now under construction have been brought on-stream.'”
Go with the flow? Opec examines the benefits of boosting capacity
Financial Times, 15 November 2007

"Shell is convinced that oil shale is no myth and that after years of secret research, it is close to achieving this oil-based alchemy....Shell declines to get too specific about how much oil it thinks it can pump at peak production levels, but one DOE study contends that the region can sustain two million barrels a day by 2020 and three million by 2040. Other government estimates have posited an upper range of five million."
Oil shale may finally have its moment
Fortune, 1 November 2007

"Brazil's state-run oil firm Petroleo Brasileiro SA (PBR), or Petrobras, anticipates that the hydrocarbon production at its key Tupi oilfield will peak in 10-15 years, Chief Executive Sergio Gabrielli said Monday. Peak production at Tupi will 'very likely' be over 200,000 barrels of oil equivalent - or BOE - a day at that point, Gabrielli told Dow Jones Newswires during an interview on the sidelines of the industry's World Energy Congress here. He added that it's too early to provide a more precise estimate. Last week, Petrobras said it estimates the recoverable volume of oil and gas at the ultra-deep Santos Basin Tupi field at between 5 billion and 8 billion BOE. That makes Tupi one of the biggest oil discoveries in years outside of countries belonging to the Organization of Petroleum Exporting Countries, comparable in size to the Kashagan oil field in Kazakhstan. Gabrielli noted that indications are that Tupi will produce a large volume of natural gas, as well as relatively light oil, cheaper to refine than that produced in other Petrobras deep-water fields....Last week, Petrobras said it's targeting a daily production of 100,000 BOE at Tupi, in a so-called pilot platform, by 2010-2011."
Petrobras Sees Tupi Peak Production in 10-15 Years
Dow Jones Newswires, 12 November 2007

"'Economics and politics will keep oil ticking over $100,' said Mark Spelman, energy expert at consultants Accenture. 'When economics are tight, geopolitics very uncertain, stocks low, winter approaching and we have a weak dollar, the oil price can only go up... the era of cheap oil is now dead.' Mr Spelman said that a dearth of supply was the primary problem, with the global economy needing a further two million barrels of oil a day in 2008 and another two million in 2009. 'Production is more concentrated than ever on West Africa, Russia and the Middle East,' he added. 'It's not clear that these major producing areas can just turn on the taps even if they have the political will.'"
'The era of cheap oil is dead': $100 a barrel is on the way
Independent On Sunday, 11 November 2007

"China has asked for a 30 percent increase in crude oil imports from Saudi Arabia for 2008 and also aims to raise imports from Iran, partly to feed two new refineries amid steady demand growth, trading sources said on Friday. Sinopec Corp, Asia's top refiner, wants to increase Saudi crude imports to 600,000 barrels per day for next year, up from this year's 460,000 bpd, a trading source close to the supply talks told Reuters. The supply pact, pending Saudi confirmation, would foster closer energy ties between Beijing and Riyadh, while maintaining the kingdom as China's top oil supplier."
China seeks 30 pct increase in Saudi oil imports
Reuters, 9 November 2007

"Pointing to a variety of political and technological constraints on energy investment, chief executives at two oil giants Thursday highlighted systemic limitations on the growth of the supply of oil, implying that there will be high oil prices for at least the medium term. BP PLC (BP) Chief Executive Tony Hayward predicted that medium-term oil prices will be in the $60-$80 range. 'For the medium term, it's very clear the era of cheap energy is behind us,' the recently installed CEO said in Houston, adding that it isn't clear how long the medium term will last. ConocoPhillips (COP) Chief Executive James Mulva had earlier told a New York financial conference that he doubted that world oil producers would be able to meet forecast long-term energy demand growth. The International Energy Agency, the energy watchdog for western economies, has projected 2030 world oil demand of 116 million barrels a day. But Mulva said he doesn't believe oil supply will ever exceed 100 million barrels a day. He didn't offer a price forecast. 'Demand will be going up, but it will be constrained by supply,' Mulva said. ' I don't think we are going to see the supply going over 100 million barrels a day and the reason is: Where is all that going to come from?'...Mulva effectively restated his stance from March, when he also highlighted the 100-million-barrel limit at the company's annual analysts' meeting in New York, citing the decline curve of existing fields and the effects of environmental regulation, which imply greater conservation."
Big Oil CEOs Point To Constraints On Supply Growth
CNN, 8 November 2007

"On the energy security, oil prices part, the numbers, one doesn’t need to be a big energy expert or anything: it’s just mathematics. I can tell you that we, in the next seven to eight years, need to bring about 37.5 million barrels per day of oil into the markets, for two reasons. One, the increase in the demand, about one third of it, and two thirds, there is a decline in the existing fields [and there is a need] to compensate for the decline. What we have done is that we have looked at all the projects in the Opec countries and the non-Opec countries, all the producing countries of the world, at the 230 oil projects, on a field by field basis, how much oil they will bring to the markets for the next five to seven years. And these are projects which are financially sanctioned projects. If they all see the light of the day in a timely manner, they will come up about 25 million barrels per day. So, 37.5 mlillion on the one hand, what is needed, and what we expect is 25 million barrels per day, and this is in the case of no slippages, no delays in the projects, and everything goes on time, which is very rare. So, there is a gap of 13.5 [sic] million barrels per day....The main issue here is that we think that, in the Opec countries, there are enough reserves. We are not sure if there is a political will to make something out of those reserves, but there are enough reserves as officially reported. However, as you rightly say, we are getting more pessimistic about non-Opec production....The main reason here is, this is very important to perhaps note, unlike the Opec countries, we think there are some geological problems in the non-Opec areas. This is not an investment issue, not a political issue, but it is more geology, because of a huge decline in the non-Opec countries....in unconventional oil, the Canadian tar sands, which is the most important one, will reach about three million [b/d] most probably in 2015, which is still only 3 per cent of the global oil production, which is still very small. So despite what some people think, I don’t think that unconventional oil will either replace the Middle East, or be a major way of addressing energy security. It makes some positive contribution, but it is very limited."
Transcript: Interview with IEA chief economist
Financial Times, 7 November 2007

"I believe oil prices are going up because the demand for oil outstrips the supply for oil. Oil is going up because developing [sic] countries still use a lot of oil. Oil is going up because we use too much oil, and the capacity to replace reserves is dwindling. That's why the price of oil is going up."
George W. Bush
White House Press Conference, 7 November 2007

"Oil prices hit a record high of $97 a barrel on Tuesday, but the next generation of consumers could look back on that price with envy. The dire predictions of a key report on international oil supplies released Wednesday suggest that oil prices could move irreversibly over the $100 a barrel threshold in the not too distant future, as the global economy faces a serious energy shortage....The agency is not known for alarmist warnings, and its World Energy Outlook is typically viewed by policy wonks as a solid indicator of global energy supplies. In a marked change from its traditionally bland, measured tones, the IEA's 2007 report says governments need to make urgent, bold decisions on energy policy, or risk massive environmental and energy-supply crises within two decades — crises and shortages that could spark serious global conflicts. 'I am sorry to say this, but we are headed toward really bad days,' IEA chief economist Fatih Birol told TIME this week. 'Lots of targets have been set but very little has been done. There is a lot of talk and no action.' .... As the world scrambles to boost energy supplies over the next two decades, an ever-greater percentage of its supplies of oil and gas will come from a dwindling number of countries, largely arrayed around the Persian Gulf, as the massive North Sea and Gulf of Mexico deposits are finally exhausted. That will leave the industrialized countries far more dependent on the volatile Middle East in 2030 than they are today, and the likes of Saudi Arabia, Kuwait and Iran will dictate terms to companies like ExxonMobil and Chevron, which increasingly operate as contractors to state-run oil companies in many producer nations."
Oil Prices: It Gets Worse
TIME, 7 November 2007

"The world's capacity to produce oil will fall well short of official forecasts, the chief executive of Total warned yesterday. In an unusually stark prediction for the head of one of the world's biggest oil companies, Christophe de Margerie, CEO of the French group, said it would be difficult to reach even 100m barrels a day. The International Energy Agency, the rich countries' watchdog, in its 'business as usual' projections, has said oil supply will reach 116m barrels a day by 2030, up from about 85m b/d today. The US government has a similar forecast of 118m b/d in 2030, including a relatively small contribution from biofuels. Mr de Margerie, however, said while forecasts could always change, '100m barrels [per day] . . . is now in my view an optimistic case'. He added: 'It is not my view: it is the industry view, or the view of those who like to speak clearly, honestly, and not . . . just try to please people.'...He was speaking at the Oil & Money conference in London, which had heard several other speakers warn of the limits to the expansion of oil output."
Total chief warns on oil output
Financial Times, 1 November 2007

"Abu Dhabi is struggling to produce enough natural gas to keep pace with a frantic growth in demand. Gas provides the fuel for power generation and water desalination in the United Arab Emirates. However, investment has lagged behind the pace of economic growth, according to Wood Mackenzie, the oil consultancy, which has a continuing research project on the region’s gas resources. 'Abu Dhabi is short of gas and it is particularly difficult in Dubai, where there is only one producing gasfield. It is insufficient to meet demand,' Colin Lothian, of Wood Mackenzie, said. According to the consultancy, the UAE consumes 1.9 billion cubic feet per day but will need six billion cubic feet per day by 2020 if it is to meet the power and water needs of an expanding population. Moreover, Dubai’s property boom is causing acute problems as demand for gas surges by 35 per cent in the summer, when air conditioning reaches peak consumption. Wood Mackenzie believes that the gas shortage will constrain economic growth if a solution is not found. 'One of the alarming aspects of this is that there are few alternatives to increasing domestic gas supply. Qatar has a moratorium on further gas developments to 2010,' Mr Lothian said. Dubai is heavily reliant on its sister emirate Abu Dhabi for gas supplies, but the latter has been forced to import fuel from Qatar. Much of Abu Dhabi’s gas is earmarked for reinjection in oil wells to maintain pressure and oil flow. 'Abu Dhabi is struggling. How long will it continue to bail out Dubai?' Mr Lothian asked."
BP offers Abu Dhabi green solution to chronic gas shortages
London Times, 31 October 2007

"Global oil production can go no higher than 100 million barrels a day, the head of Libyan oil policy and Chief Executive of Libya's National Oil Co. Shokri Ghanem said Tuesday. 'There is a ceiling or 100 million (barrels a day) and the world cannot continue to produce oil indefinitely,' Ghanem told an energy conference in London. Once that ceiling is reached, global oil production will start to decline, Ghanem said. He didn't specify where the data came from. According to the International Energy Agency forecasts, global oil demand through 2030 is set to reach 116 million barrels a day."
Libya Oil Head: Global Oil Output Can Only Reach 100 Million B/D
Dow Jones Newswires, 30 October 2007

"China's crude oil production will peak at about 190 mln tons by 2015, according to a report by the China News Service. The report cited Pang Xiongqi, professor at the China University of Petroleum, who also said that the country's natural gas production would peak at 120 bln cubic meters by 2035. China faces even more serious energy supply challenges once the peak has been passed, Pang said, and will be forced to spend more of its foreign currency reserves on increasingly expensive crude imports. Dwindling oil production could also lead to a further increase in the consumption of coal, putting more pressure on the environment, Pang said. "
China's oil production to peak in 2015 - report
AFX, 29 October 2007

"The hydrocarbon-rich Gulf countries are exploring the use of alternative and renewable energy resources, including coal, nuclear, solar, wind and hydrogen, says a leading industry expert. 'The vast majority of power generation projects in the Arabian Gulf are for power stations using conventional gas for their energy source,' said ESR Technology's group CEO David Weaver. ESR is one of the world's leading engineering, safety and risk management companies. 'But the region is struggling to find enough suitable gas to meet future power demands and the first signs are beginning to emerge of major investment in the region into alternatives,' he added."
Gulf countries eye alternative energy sources
Gulf Daily News, 28 October 2007

"Peak production of conventional oil came 30 months ago and although new production projects will come on stream in the next few years, they will have a hard time balancing the depletion from existing fields which various speakers placed at 4-5 percent a year and probably increasing. As a greater share of world production shifts to undersea production, which is expensive and is usually water flooded to get the oil out as quickly as possible, some believe the annual world depletion rate could increase to six percent or more. The most ominous development for countries such as the U.S., which must import most of its oil, is the emerging concept of 'peak exports' which was discussed by several speakers. Peak exports simply means that oil-producing countries are using more and more oil at home - leaving less to sell abroad. Moreover, sentiment is starting to develop in many nations that they must save some oil for future generations, not just sell it to the foreign devils as quickly as possible. This clearly means that major oil importers will face a shortfall in their ability to obtain oil many months or years sooner than they had been anticipating. The fall in the amount of oil available for purchase is likely to drop much more quickly than declines in production. When world oil exports fall, if they have not started doing so already, effects are likely to sharp and painful."
The Peak Oil Crisis: A Message From Houston
Falls Church News-Press, 25 October 2007

"So-called 'peak oil' is coming, but it doesn't have to be a disaster, Chevron Chief Technology Officer Don Paul said Wednesday.... At the Dow Jones VentureWire Alternative Energy Innovations conference in Redwood City, Calif., Paul said many people think the industry will hit this maximum level by 2020. 'The question is will there be peak oil? Yes,' said Paul, who also is a Chevron vice president. 'But will it be the disaster [some people] expect? I don't think it has to be. We have other ways of making fuel.' The remaining fuel could come from biofuels, oil from tar sands and coal, he said, adding that each of these potential sources has its challenges. With tar sands, the problem is the need to produce hydrogen, which is added to tar sands to produce fuels, he said. Converting coal into fuel brings up the problem of what to do with the carbon. Carbon-capture and sequestration technologies, which involve capturing emissions and storing them underground, have not been proven to work on a large scale, he said.... While there could be some technologies that could help solve the problem of capturing and sequestering large amounts of carbon, they won't do any good unless the infrastructure is in place to use them, he said. And to capture and sequester carbon from U.S. coal plants, 'you would need infrastructure the same size as the current natural-gas system, which took 100 years to build,' he said. 'That's a lot of pipes.' Biofuels also face a set a challenges, mainly the difficulty of growing the technology to large enough volumes to make a difference, Paul said. 'It's going to require a different operating business than someone operating a small plant out at a corn field,' he said. Paul said he is looking for technologies with the potential to produce at least as much as the total U.S. ethanol production today in one plant. On average, Paul estimates it takes 15 years to bring biofuel technologies to larger scales, he said. 'That will be a shock to some in the tech industry,' he said, adding that some entrepreneurs may not realize the challenges of building out larger plants and transporting the fuel to where it's needed. 'It's true that with startups, realism isn't always the first thing on the list -- but that's OK.'... even if all the challenges to biofuels and coal-based fuels are met, Paul said he doesn't expect they will ever displace oil because the demand for fuel is so great. 'You do hear, 'We're going to displace [oil],' he said. 'I don't buy it. If you look at [the demand], we're going to need every molecule.'"
Chevron CTO Says Peak Oil Won't Be a Disaster
Greentech Media, 25 October 2007

"World oil output has already peaked, and prices that have surged to record highs above $90 a barrel are a sign of things to come, said investor Boone Pickens, chairman of Dallas-based BP Capital LLC. Global production has peaked at 85 million barrels a day, Pickens, 79, said in an interview today at a Houston conference sponsored by the Association for the Study of Peak Oil & Gas, a non-profit think tank. Oil will rise to $100 a barrel before falling to $80 again, he said. Earlier this week, he said crude would reach $100 by year's end. 'As this unfolds, you're going to have to find alternatives that are going to do the job that oil is doing,' Pickens said. 'Everyone is going to have to come to grips with this in the next two or three years. People are going to have to figure it out.''
Global Oil Output Has Already Peaked, Pickens Says
Bloomberg, 19 October 2007

"Organization of the Petroleum Exporting Countries (OPEC) chief Abdalla Salem El-Badri said yesterday that the organization was 'concerned' at the recent surge in oil prices and was convinced that the current record high prices were not justified by the fundamentals. 'OPEC is doing all it can and is carefully watching developments in the oil market and has observed with concern the recent escalation in oil prices,' El-Badri said from Vienna. Yesterday, world oil prices hurtled to fresh record highs, striking over $88 per barrel in New York amid fears over tensions between Turkey and Kurdish rebels in crude producer Iraq.... 'OPEC cannot do much now,' Libya’s top oil official Shokri Ghanem told a news agency. 'OPEC did all that it can.' At its meeting in September, with oil a touch below $80, the OPEC agreed to boost output by 500,000 barrels per day (bpd) from Nov. 1 to soothe consumer concerns of tight supplies and costly fuel.... But oil is now closing in on the inflation-adjusted high of $90.46 seen in 1980, with investors citing rising tension between Turkey and Kurdish separatists in Iraq, robust oil demand growth, tight fuel stocks and a weak dollar."
We’re Doing All We Can: OPEC Chief
Arab News, 17 October 2007

"U.S. Energy Secretary Samuel Bodman said Friday that high crude prices are being driven by fundamentals, not speculators. 'It's clear we've got suppliers unable to keep up with demand,' Bodman said, in an interview on CNBC. 'That's what's driving prices.' Bodman added that tight oil output capacity means producers don't have the flexibility to easily increase supplies as they had in the past."
US Energy Secy: Oil Supply Unable to Keep Up with Demand
Schlumberger, 12 October 2007

"For decades, [Norwegian Oil Companies] Statoil and Hydro relied on the plentiful reserves on the Norwegian continental shelf for almost all their output; last year, that area off the country's north and west shores accounted for more than four-fifths of the two firms' production. That bounty has made this nation of just 4.6 million people rich. Government taxes on the country's oil business — Norway is the world's fifth largest exporter by volume — have helped bloat Norway's national pension fund to around $350 billion. But those good times couldn't last forever. With fields beginning to dry up, oil production has slid to 2.6 million bbl a day this year from 3.5 million six years ago, says John Olaisen, Oslo-based energy analyst at Carnegie, a Nordic investment bank....Many onshore reserves, which are relatively easy to exploit, are being depleted. So Big Oil is being forced offshore into increasingly complex projects, often at great depths and in harsh conditions."
Northern Might
TIME, 11 October 2007

"....production is not increasing but demand is. It sounds a bit obvious but the much vaunted hikes in output from companies such as Exxon [NYSE:XOM], ConocoPhillips [NYSE:COP], BP [NYSE:BP] and the rest have simply not materialised. They assured us that they would be producing extra barrels to sate the world’s ever growing desire for hydrocarbons but due to a series of “mishaps” and “project delays” those extra barrels have never arrived. Meantime a world addicted to oil (and gas) continues to consume even more. Since 2003 companies and countries have been telling us they would produce more 'organically' by finding new deposits, or by using technology, to get more out of existing proven reserves. Outside of the odd success story like Marxist Angola, they have palpably failed to do so.The free marketers - wrecking the world with their failed political ideology - told us that as oil and gas became more expensive this would trigger a wave of new output. It is the way the market works; we do not need communist rubbish such as 'planning.' Gosh no! The market would prevail. But it has not."
Peak Oil Passnotes: $100 Oil?
Resource Investor, 12 October 2007

"The third hard truth is that production of 'easy oil' (oil and gas that are relatively easy to extract) will not keep pace with the growing demand. At a time when demand for energy is surging, more and more of the world's conventional oil fields are going into decline. Many of the world's future resources are located in the Arctic, or offshore in deep water. Much is in the form of oil shale and oil sands - so-called 'unconventional' oil. All of these are more energy-intensive, difficult and costly to develop."
James Smith is UK chairman of Royal Dutch Shell plc
Firms 'need clear climate policies'
BBC Online, 8 October 2007

"I have a hard time seeing us get to 90 million barrels a day by 2020. I can see us getting there, but on a project-by-project basis, I don’t know the full quantitative impact that new developments in old fields will have. This is a major unresolved question. I don’t know anyone who really has studied and understands it … seeing us ever reaching 100 million barrels a day requires a major stretch on my part.... By 2015, we could get 3 million barrels a day from the oil sands, between 0.5 and 1.0 mmd/day from heavy oil in Venezuela, but none from the oil shale. By 2020, the Canadian oil sands could produce 4 mmb/day, with Venezuela’s heavy oil still in the same 0.5 to 1.0 mmb/day range and oil shale still at zero....growing net production additions is hard. It isn’t just the size of the resources but the rate at which we can develop them, which is again a function of quality of the resource and access to it."
Interview with Richard Nehring - President of Nehring Associates
ASPO-USA, 8 Oct 2007

"Output from the North Sea fell for the fifth month in a row in July, despite record oil prices, in a development that could increase concerns about the UK's growing reliance on imports from potentially volatile areas. The latest Oil and Gas Index from Royal Bank of Scotland showed total production of oil and gas averaged 2,088,083 barrels oil equivalent daily. This was down 10.3% on June and 17.9% on July 2006. The decline occurred in a month when operators traditionally take advantage of relatively good weather to complete maintenance work. Production of gas was badly disrupted after the 251-mile central area transmission pipeline was shut down after being damaged by a ship's anchor off Teesside on July 1. This brings in 20% of the UK's gas from the North Sea. Gas production fell 15% in the month to 5.026 billion cubic feet daily, down 20.7% on the year. Oil production averaged 1,203,164 barrels daily, down 6.5% on the month and 15.7% on the year. However, the fact that total production has been well down on both a monthly and annual basis in every month this year since March could trigger alarm bells about the state of the province."
Alarm bells ring about North Sea output
Herald (Scotland), 5 October 2007

"For many years, the idea that global oil production will soon start to fall, with potentially catastrophic economic consequences, has languished on the fringes of the environmental debate, with nothing like the recognition of climate change, and shunned by the industry itself. But when the history is written, 2007 is likely to go down as the year the issue of peak oil production went mainstream. In Cork, the former US energy secretary, James Schlesinger, used his keynote speech to tell delegates that they were no longer a tiny minority crying in the wilderness: 'You can declare victory . . . and prepare to take yes for an answer.' It was a bold claim, but true. Although most senior oil executives continue to deny publicly what is becoming more obvious by the month, the industry-wide 'omerta' is beginning to crack. Thierry Desmarest, chairman of Total, declared last year that production would peak in 2020, and urged governments to suppress demand to delay the witching hour. In Cork, the former Shell chairman, Lord Oxburgh, told me he expects demand to outstrip supply within 20 years, and that the oil price may well hit $150. He warned: 'We may be sleepwalking into a problem that is actually going to be very serious, and it may be too late to do anything about it by the time we are fully aware.'..A recent study by analysts John S Herold showed that the world's 230 biggest oil companies raised their upstream spending by 45% to more than $400bn in 2006, but that oil and gas reserves inched up by just 2%. There would have been no oil reserve growth at all without the inclusion of hard-to-produce bitumen deposits in Canada. The report concluded that peak oil has become part of the industry's long-term planning, and this would force oil companies to choose from four options: 'Try to become a dominant participant, find a niche operational talent, harvest assets, or liquidate quickly.'.... Organisation for Economic Cooperation and Development oil production has been falling since 1997, and it is now widely agreed that output in the world, outside the Organisation of Petroleum Exporting Countries (Opec), will peak by about 2010. This much is accepted even by those who reject the idea of an impending global peak, such as ExxonMobil's chief executive, Rex Tillerson, who told me recently that he expected no further output growth from non-Opec production beyond the end of the decade. This matters because there are severe doubts about the size of Opec's reserves, buttressed last year by the leak of internal documents from the Kuwait Oil Company (KOC). The paperwork revealed that although Kuwait has for two decades been telling the world it has about 100bn barrels of proved reserves, KOC's internal assessment was just 24bn, apparently confirming the widely held suspicion that the reserves of many Opec countries were inflated in the early 1980s, when members were vying for larger shares in the new quota system. In 2005, the consultancy PFC Energy briefed US vice-president Dick Cheney that, on a more realistic reading of Opec's reserves, its production could peak in 2015.... With the International Energy Agency (IEA) forecasting demand to rise by 2m barrels a day to almost 88m barrels a day by the end of this year, the most important question in the oil market is whether Opec's current production ceiling is entirely voluntary. Even if Opec can raise its production, oil consumption in member countries, particularly Iran and Saudi Arabia, is growing so fast that exports may soon start to fall in any case....The one Opec member with the capacity to raise its oil production dramatically - in theory at least - is Iraq, where for many years production was held below its natural potential by war with Iran and UN sanctions. The country's pivotal importance was recently recognised by IEA's chief economist, Fatih Birol, who warned: 'If by 2015 Iraqi production does not increase exponentially, we have a very big problem, even if Saudi Arabia fulfils its promises. The figures are very simple, there's no need to be an expert. The war it seems was not just 'largely about oil' as even Alan Greenspan, former head of the US Federal Reserve, now concedes, but all about deferring peak oil.The war it seems was not just 'largely about oil' as even Alan Greenspan, former head of the US Federal Reserve, now concedes, but all about deferring peak oil. But if so, the strategy has failed miserably...the amount of oil discovered each year has been falling since the mid-1960s, and amounts to just 9bn barrels a year, less than a third of annual consumption... Opponents of the idea claim that peak oil is not imminent because there remains lots of oil to be discovered in areas such as West Africa or the Arctic, where Russia, Canada, Denmark and Norway are now scrambling to establish territorial claims. These views are often justified by reference to a study of the world's potential oil resources produced by US Geological Survey (USGS) in 2000, which concluded that the industry could discover another 650bn barrels of oil by 2025. Since the amount of oil discovered each year has been falling since the mid-1960s, and amounts to just 9bn barrels a year, less than a third of annual consumption, this forecast has long been regarded as wildly optimistic by peak oil forecasters. But in another sign of how quickly the debate is moving, the USGS figure has also been discredited by oil industry experts at a private enclave held in Colorado last November - the Hedberg research conference on understanding world oil resources. It was organised by the American Association of Petroleum Geologists to try to resolve the wide range of estimates of future oil availability, and it was a closed-door affair, attended by technical experts from all the super-majors - ExxonMobil, Shell, BP, Total and Chevron - along with some of the biggest state-owned oil companies, such as Saudi Aramco.... According to Ray Leonard, a senior executive with Kuwait Energy Company, the experts challenged the USGS's optimistic assessments on the basis of their companies' more detailed proprietary data. Leonard says the majority opinion at the conference was that future oil discovery will total 250bn barrels - little more than a third of the USGS number. On the basis of that rough consensus, Leonard concludes that global oil production will peak and then plateau at between 95m and 100m barrels a day - bringing soaring oil prices - in around five years' time."
Slippery slope
Guardian, 3 October 2007

"Oil prices could top $100 a barrel by the end of next year and remain above that point for years to come, the chief economist of Canadian investment bank CIBC World Markets said Tuesday.Jeffrey Rubin said rising demand within oil-rich nations, such as Mexico, Venezuela and Saudi Arabia, will put pressure on global oil prices in the coming years. That, combined with the increased cost of pulling petroleum from reserves deep under the sea or wringing it out of oil sands in Canada, will keep oil prices high even if demand in the Western world remains constant.....Rubin said oil exports from OPEC countries, Russia and Mexico will likely decline by about 3 million barrels per day over the next five years. The biggest drop, he expects, will come from Mexico, a key U.S. supplier. 'Of the 3 million barrels, we're probably talking about 2 million barrels are going to come directly out of U.S. supplies,' he said. Rubin expects Mexican oil imports to the U.S. will dry up by about 2012. Some of that decline will be made up by imports from other parts of the world, but the lions' share - nearly a third of all U.S. oil imports - will come from Canadian oil sands, he predicted. But replacing relatively easy-to-refine liquid crude with petroleum from oil sands is certain to increase costs, he said. By the end of the decade, Canadian oil sands are likely to represent the world's largest source of new oil supplies, he said. 'We're basically replacing low-cost oil with high-cost oil,' he said."
CIBC economist sees $100 oil in 2008
CNN, 2 October 2007

"Royal Dutch Shell PLC Thursday signed a deal with OAO Tatneft , Russia's sixth-largest oil producer by volume, to develop a major tar sands project in Tatarstan, its home region, and paved the way for other potential projects. The deal follows an alliance signed by Shell in July with Russian state-controlled oil company OAO Rosneft for oil and gas production and refining in Russia and abroad. Under the agreement setting the principles of a strategic partnership, the two companies will devise a program for heavy oil development in Tatarstan, Shell said.... Russian companies don't have any substantial experience in developing tar sands. Shell, by contrast, is active in developing natural bitumen deposits in Alberta, Canada.... Tatneft expects to produce 1.5 million to 2 million metric tons of oil a year from the tar sands project by 2020 for which it has signed the alliance with Shell. Shell said the two companies will 'conduct a feasibility study and assess technologies for extraction and processing (upgrading) of heavy oil, which is part of existing exploration and production licenses held by Tatneft.' According to Russian media reports, Tatneft had a shortlist of eight candidates that included Shell, Exxon Mobil Corp. (XOM), Chevron Corp. (CVX), ConocoPhillips (COP) and Repsol YPF SA (REP). A Tatneft spokesman said neither the form of cooperation, nor the target production price are known."
Shell signs deal with Tatneft on Russian tar sands project
MarketWatch, 27 September 2007

"Ray Leonard of the Kuwait Energy Company was the speaker who, for me, stole the show. He offered, prefaced with a few caveats, insights from within the oil industry, setting out how what the oil industry tells the public and what it actually thinks are very different. One got a sense from listening to Leonard of the degree of profound unease behind closed oil company doors, as year after year they have to downsize their declared reserves and find themselves less and less able to be optimistic. A clear and accomplished speaker, he spoke of a conference last year called the Hedberg conference where an invited audience from oil companies and bodies like the USGS and the EIA all, in confidence and with no press presence, exchanged their best data, coming up with far more sobering data than had previously been made public. These kind of 'I’ll show you mine if you’ll show me yours' sessions were also key in the early stages of the climate change issue, and led, eventually to the formation of the IPCC. In the early stages though, as now with peak oil, those with the actual data preferred a cautious initial approach behind closed doors....As an example, in terms of growth from exploration, he compared the figures of the USGS survey in 2000 with the data generated at the event. The USGS figure, on which much international government complacency on this issue is based, is 700 billion barrels. The figure that emerged from the industry was just 250 billion. He said that although for him that wasn’t a great surprise, it is a confirmation of an emerging trend. In terms of growth from unconventional oil resources, he was doubtful that the Alberta Tar Sands will be able to produce anything like what they are predicted produce. Limiting factors include the carbon implications of the extraction, the availability of cheap natural gas, and the amount of water it requires. There will be production from Alberta and the other main unconventional resources, Green River Shale in Wyoming and the Venezualan oil sands, he said, but nothing like has been predicted. These unconventional sources will be slow and expensive he said, and will do little to fill the widening gap caused by depletion. He concluded that we will see a peak rather than a plateau, which will occur at around 95-100 million barrels a day, and in a very high price environment."
ASPO 6. In Praise of… #3. Ray Leonard
Transition Culture, 25 September 2007

"Mexico's energy industry problems run far deeper than terrorist attacks on its infrastructure, analysts say, and have major implications for U.S. oil supply. 'Mexico's oil production is in decline. There's probably no way to stop it,' said Mike Rodgers, an expert at one of the top oil industry consulting firms, PFC Energy in Houston. Mexico is the second largest supplier of oil to the United States (about 1.5-million barrels a day). But output from its major fields is dwindling fast, according to official figures from the state-owned oil giant Petroleos Mexicanos (Pemex). The country's known oil reserves will run out in nine years, the government says, potentially undermining the nation's oil-dependent budget.... Mexican output peaked at just over 3.4-million barrels a day in 2004. 'I don't believe we'll ever see it that high again, no matter how much is invested,' said David Shields, an oil industry consultant in Mexico City. Daily output at Mexico's biggest oil field, Cantarell, highlights the problem. Production there dropped by a staggering half a million barrels in the last 18 months, to 1.5-million barrels from 2-million. Once the world's second-biggest oil field, it is expected to continue losing production, down to as little as 600,000 barrels a day by 2013.... Pemex has said it can offset declines at Cantarell with new production from other fields. While several sites, onshore and offshore, have potential, it would take a decade of massive investment to bring them on stream, analysts say. 'They really don't have a way to fix the problem,' says Rodgers. 'They could have if they had used some foresight. Now it's virtually impossible.' In his recent state of the union speech, Mexican President Felipe Calderon mentioned the nation's dwindling reserves. 'Our petroleum reserves have been reducing constantly. It has to be said,' he said, as if broaching a taboo subject. Rather than proposing ways to increase production, Calderon seemed to accept there was no way for Mexico to drill its way out of the problem. Instead, he called for 'an urgent reduction in public spending to reduce the enormous dependence on oil revenue.'"
Analysts watch, wince as Mexico's oil supply dwindles
St Petersburgh Times (Florida), 24 September 2007

"Specifically, Goldman Sachs said it has learned that:

1. The energy, water, and labor bottlenecks in the Canadian tar sands are severe and will likely prevent significant scaling up of the supplies at an oil price of $70/bbl, while a substantial change in Canadian policies in order to incentivise the use of nuclear power in tar sands production, and facilitate immigration of much needed foreign engineers appears unlikely in the near term;

2. The nationalisation of the Orinoco belt assets by Venezuela has led to a sharp decline in non-conventional output and no further foreign input of capital;

3. Biofuel production has substantially driven up agriculture prices, pushing the subsidised cost of many of these fuels anywhere from $65/bbl to $150/bbl with a further scale-up likely to push agriculture prices even higher and hence raise biofuel production costs;

4. ExxonMobil abandoned its gas-to-liquids (GTL) project due to high costs, the Sasol GTL plant in Qatar has run into technical problems in the ramp-up phase, and the Shell GTL project is significantly over budget, all of which suggest that GTL is off the table at an oil price of $70/bbl."

Goldman Sachs lifts end-of-year oil price forecast
Energy Publisher, 24 September 2007

"When it comes to oil shale, in the old days you used brute-force digging. That takes way too much energy. We had to figure out how to construct an oil facility that operates entirely underground. The goal is to convert the oil shale into crude oil, then pump that to the surface.It's going to take time. These efforts won't be commercially viable until after 2020 because of the technology required, and the science and research involved. This is not a business for startups."
Don Paul - Vice President and Chief Technology Officer, Chevron, San Ramon, California
Fast Company, October 2007

"...the North Sea, the reserve that turned the United Kingdom into an oil superpower in the 1980s, much to Margaret Thatcher's delight. It was fun while it lasted. Production is falling off a cliff. The U.K.'s oil and gas output peaked in 1999 at 4.5 million barrels a day (a figure that combines oil and the equivalent output of natural gas). Today it's about three million barrels, a figure expected to decline by 10 to 15 per cent a year. The U.K. is now a net importer of oil and gas. Mexico's Cantarell field, one of the world's most prolific oil producers, is sweating too. Last year's production, which averaged 1.78 million barrels a day, was 13 per cent lower than the previous year's. A similar decline is expected this year. Meanwhile, demand is climbing relentlessly. China was self sufficient in oil until the mid-1990s or so. Now it's the world's second-biggest oil importer. Its consumption has climbed about 50 per cent since 2000 alone. China can't take all the blame. Note that some of the world's biggest oil producers are holding back oil to feed their own growing economies. Saudi Arabia's consumption was up about 30 per cent between 2000 and 2005; Iran's was up 21 per cent. Since the 1960s, two barrels of oil have been consumed for every barrel found."
Two barrels of oil are used for each one found. $100 oil anyone?
Globe and Mail (Canada), 21 September 2007

"Canada and Britain can help achieve global energy security by working together on international resource development, says the head of the British government's foreign trade and investment agency. Andrew Cahn, CEO of UK Trade and Investment, said Canada and Britain can jointly promote the idea that energy security depends upon finding international cost-effective, secure and environmentally friendly ways of exploiting known oil and gas reserves and exploring for new ones. 'Energy security has two different meanings,' said Cahn. 'One is making sure that we have adequate supplies for our growing needs in the future. The other is to make sure we are protected against terrorism and other threats. 'On the latter, huge strides are being made and a lot of joint work is done. On the former, the resources are there - and Canada has a large amount of them - but there are technological challenges. Only a small proportion of Canada's resources are now available for exploitation using current technologies.'....He said declining reserves in the once-bountiful North Sea have provided U.K. firms with expertise in finding innovative technological solutions and overcoming environmental challenges, which can also be used to extract oil and gas from hard-to-access areas in Canada. As reserves in the Western Canadian Sedimentary Basin decline, Canadian producers have repeatedly stressed the need to tap into unconventional plays like coalbed methane, tight gas and shale gas while at the same time calling for the development of new technologies.....According to the U.S. energy information administration, which analyses energy supply and demand on a country-by-country basis, the U.K. is the largest oil and gas producer in the European Union. But it became a net importer of gas in 2004."
Britain wants to be part of Canada 'oil rush'
Business Edge (Canada), 21 September 2007

"Lord Oxburgh, the former chairman of Shell, has issued a stark warning that the price of oil could hit $150 per barrel, with oil production peaking within the next 20 years. He accused the industry of having its head 'in the sand' about the depletion of supplies, and warned: 'We may be sleepwalking into a problem which is actually going to be very serious and it may be too late to do anything about it by the time we are fully aware.' In an interview with The Independent on Sunday ahead of his address to the Association for the Study of Peak Oil in Ireland this week, Lord Oxburgh, one of the most respected names in the energy industry, said a rapid increase in the price of oil was inevitable as demand continued to outstrip supply. He said: 'We can probably go on extracting oil from the ground for a very long time, but it is going to get very expensive indeed. 'And once you see oil prices in excess of $100 or $150 a barrel, the alternatives simply become more attractive on price grounds if on no others.'"
Oil industry 'sleepwalking into crisis'
Independent On Sunday, 16 September 2007

"As crude oil prices hit a record high yesterday, an as-yet unreleased Queensland Government report warns of massive social dislocation, rising food prices and infrastructure headaches because of rising oil costs. The report on the looming 'peak oil' crisis concludes that we will have to re-think the way we live and travel in the next few years as relatively cheap liquid fuels become a thing of the past. 'Peak oil' refers to when global output fails to meet demand, a situation the report estimates will occur in the next few years, although some economists believe we are now on the cusp....The report was prepared by a taskforce of scientists and industry experts, including Queensland's chief geologist John Draper and the Department of Primary Industry's chief scientist Joe Baker, and chaired by the newly appointed Minister for Sustainability Andrew McNamara."
Report warns of petrol chaos
Courier Mail (Australia), 15 September 2007

"Crude oil rose to a record $80 a barrel in New York after supplies dropped the most this year. U.S. oil inventories fell a greater-than-expected 7.01 million barrels to 322.6 million last week, the Energy Department said today. Prices also rose after OPEC said yesterday it would increase production by 500,000 barrels a day, less than is needed to meet a seasonal rise in demand....The IEA, an adviser to 26 industrialized nations, said global oil demand will rise 1.4 percent to 85.9 million barrels a day this year in a monthly report. Consumption will increase 2.1 million barrels a day to 88 million in 2008."
Oil Rises to Record $80 on Larger-Than-Expected Supply Decline
Bloomberg, 12 September 2007

"U.S. refineries must be expanded to handle a rising tide of crude-oil imports from Alberta's tar sands, the world's second-biggest oil deposit, says John Hofmeister, Royal Dutch Shell PLC's U.S. chair. Shell, Saudi Aramco, ConocoPhillips, BP PLC and Marathon Oil Corp. plan to spend a combined $15 billion (U.S.) to expand refineries from Michigan to Texas to process more low-grade oil from the tar sands."
More refining needed to process Alta. output
Toronto Star, 11 September 2007

"Opec, the cartel of most of the world’s oil producers, meets in Vienna on Tuesday. Every indication is that the producers will refuse the request of consuming countries to open the spigots so as to bring down oil prices. 'You cannot convince any member to add more crude to the market,' Abdalla el-Badri, Opec secretary-general, told the press. Venezuela can’t: its production is sinking as Hugo Ch�vez replaces Petr�leos de Venezuela’s highly regarded technocrats with political hacks. He wants more for each barrel he produces, especially if high prices threaten American prosperity. Iran, suffering from falling output as the American embargo denies the country the know-how and equipment needed to update facilities, is also a price hawk. The key player, Saudi Arabia, will talk the talk of moderation and friendship to the West, then whine that prices are already down from their summer peak, that a slowing American economy will reduce the demand for oil, and that the weaker dollar means the kingdom is getting less real purchasing power for its oil. Unsaid is the fact that the Saudis need the money to fund the lives of thousands of indolent princes, and the terrorist madrasas it continues to finance. Best of all, Opec now knows that it can count on Vladimir Putin to help it in two ways – one intentional, the other unintentional. Putin will cooperate with Opec because high oil prices make it easier for him both to provide Russia’s people with butter and his military with guns. He is also inadvertently helping to maintain prices by allowing Russia’s oil output to fall as his former KGB and other cronies take over the country’s oil companies, and reduce foreigners to minor roles. As The Economist magazine pointed out, KGB-trained thugs 'know how to grab assets and jail foes, but not how to run real businesses'. In short, there is little likelihood that any of the major producers will permit the foreign investment they need to step up production sufficiently to make a significant dent in the current price of oil. The Saudi royal family doesn’t want to antagonise the bin-Ladenites by inviting American companies in, although it relies on the American military to keep it in power. Mexico won’t allow American capital in, but wants to ship unlimited numbers of its workers out to the United States. The Bush administration acquiesces. Any downward pressure on prices will have to come from a reduction in the demand for traditional petroleum... Meanwhile, the American economy remains dependent on its enemies for its fuel, its politicians refuse to take meaningful steps to reduce that dependence, and America sleeps."
US pays the price of relying on foes for oil
Sunday Times, 9 September 2007

"Shell is considering using nuclear power to operate its controversial tar sands programme in Canada. Tar sands extraction – mining oil from a mixture of sand or clay, water and very heavy crude oil – uses a huge amount of energy and water. Environmentalists say it results in more than three times as many emissions of carbon dioxide compared to conventional oil production. Now Canadian firms AECL and Energy Alberta have proposed building a nuclear reactor near the site of Shell's vast Athabasca tar sands development. The boss of Energy Alberta has said the C$6bn (�2.8bn) reactor has the backing of a large unnamed copany that would take 70 per cent of the reactor's energy.... Walt Patterson, associate fellow at think-tank Chatham House, said: 'Extracting oil from tar scares the pants off me. The whole idea is fundamentally perverse in the context of our present environmental situation. To then power it with nuclear, it seems to be the worst of all worlds.'... Shell and its Athabasca partners currently pump over 155,000 barrels of oil per day from the tar sands but want to increase this by five times over the next 20 years. This would need more than an extra 1,000MW of generating capacity. Most of the project's existing power comes from a gas-fired plant, but gas production in North America is declining."
Shell could take nuclear option to mine oil from Canadian tar sands
Independent On Sunday, 9 September 2007

"High oil prices are here to stay, according to Total, the French oil multinational, which has raised its forecast value of a barrel of crude from $40 to $60 as it predicts continuing strong demand for oil, rising costs and political constraints on production. Total’s decision to bet on a higher oil price is based on fundamentals, said Christophe de Margerie, the chief executive, who said the recent turmoil in the debt markets had shaken most of the speculative money out of oil futures. Despite the loss of the hot money, the price of Brent crude was about $77 per barrel yesterday, close to its peak of $78. 'Demand is still strong in Asia, there is strong demand in the Middle East for electricity generation and water purification. The price will remain high,' he said. The Total chief said that biofuels would not provide an answer for the world’s energy needs, insisting that hydrocarbons and, increasingly, nuclear power, would supply 80 per cent of the world’s energy for the next 50 years. The French energy giant’s shift to a higher oil price scenario forced it to reduce by 20 per cent its production growth estimates for the period to 2010. The company also warned of significant cost inflation and the risk of project delays. Rising costs have pushed up the oil price at which Total’s investments earn an acceptable return. The French company is putting more money into heavy oil and bitumen projects in Canada but the hurdle rate for such investments has risen from an oil price of $30-$35 per barrel to $50 per barrel. Mr de Margerie said that the world must turn to Iran, where Total is considering a $10 billion (�5 billion) gas project. 'We are not interested in a fight with the US Government,' he said. 'This project has to fly one day. Everyone has to take responsibility if the world doesn’t have enough gas.'"
Price of oil will continue to rise, says Total chief
London Times, 7 September 2007

"Production of conventional oil in OECD countries will peak as soon as in 2010, increasing the world's dependence on the OPEC cartel and Russia, and continuing the rush to non-conventional deposits such as Alberta's oilsands, the chief executive of Norway's Statoil ASA predicted yesterday. Helge Lund, in Calgary to talk about Statoil's oilsands strategy, said he expects to see continued international interest in Alberta's resources, regardless of its high development costs and human resources challenges. 'We see cost challenges all over the world -- in Norway, North Africa, West Africa, the Gulf of Mexico,' the 44-year-old economist and former McKinsey & Co. consultant said during a wide-ranging discussion with reporters. 'I don't think there is any safe haven in the global oil-and-gas industry.'... Oslo-based Statoil, which is expected to complete a US$32-billion merger with Norsk Hydro on Oct. 1, is one of the world's top 12 oil companies, with operations in 35 countries.... While other global companies are reluctant to offer predictions on when oil production might peak, Mr. Lund said Statoil's view is that it will come between 2010 and 2015 for the 30 countries in the Organization for Economic Co-operation and Development. 'That means, from that perspective, that we will be more dependent on a few countries in the Middle East, Russia and a few other areas, generally OPEC,' he said. 'The non-conventional resource comes in as an important part to make up for that.' Statoil paid $2.2-billion in April for Calgary-based oilsands startup North American Oil Sands Corp., which it plans to turn into its largest project outside Norway.... In the oilsands, its plans are unchanged from North American's strategy: First oil, using steam-assisted gravity drainage technology, is expected in 2010, while peak production of 200,000 barrels a day will come near 2020."
STATOIL SEES OECD PEAK
National Post (Canada), 7 September 2007

"Nexen Inc shares rose on Friday despite the latest in a series of cost increases at its Long Lake, Alberta, oil sands project, which lifts the price tag to nearly double the initial estimate. Nexen, the No. 4 Canadian independent oil explorer, said the Long Lake bitumen and synthetic crude development could cost as much as C$6.1 billion ($5.8 billion), up from the last estimate of C$5.8 billion. The project, in which Nexen has a 50 percent stake, was pegged at C$3.4 billion when the partners sanctioned it in 2004. The company blamed poorer than expected productivity in the construction of its upgrading plant and difficulty securing labor amid Alberta's oil sands rush. It pushed the startup of the plant back to the first or second quarters of next year from the previous goal of late 2007.... Nearly all oil sands projects have been hit with large cost overruns due to a tight labor supply in Alberta and industry-wide inflation in the costs of key materials like steel."
Nexen shares up despite latest oil sands cost jump
Reuters, 31 August 2007

"The northeastern shore of Greenland could provide the U.S. with significantly fewer billions of barrels of oil and gas resources than previously thought, the U.S. Geological Survey said Tuesday. The lower resource estimate will mean that, as domestic production declines, the U.S. will have to increasingly rely on other major producers such as Russia, Venezuela, West African states and the Middle East. The USGS published the first review of the hydrocarbon potential of the region in seven years, estimating more than 30 billion barrels worth of petroleum reserves. The government agency said it believed the area - which lies under massive sheets of ice in water depths up to 500 meters - holds 9 billion barrels of oil, 86 trillion cubic feet of natural gas and 8 billion barrels of natural gas liquids that are undiscovered but recoverable. The 2000 survey estimated 47 billion barrels of oil, 81 trillion cubic feet of gas, and 4 billion barrels of natural gas liquids.... The USGS said there is no current technology for exploring or developing oil and gas accumulations under sea ice such as those thought to lie in reservoirs in northeastern Greenland. As the last major survey of the geologic potential of the Arctic estimated that 25% of the world's remaining undiscovered hydrocarbon resources lay within the Arctic circle, the U.S. government was hoping to supplant other crude imports with future supplies from the Arctic."
USGS Greenland Survey Shows Much Lower Resource Potential
Dow Jones, Newswire 29 August 2007

"In July, Turkey signed a preliminary agreement with Iran to develop three gas projects in the giant South Pars gas field and build two pipelines to ship an estimated 30 billion cubic meters of Iranian and Turkmen gas to Turkey for resale to Europe.... in the long run, the planned alternative gas suppliers to the EU --including Azerbaijan, Algeria, and Norway -- might not be able to sustain such large volumes of production, and the EU will be forced to either cut back on gas consumption or return to Russia for its gas supplies. Potentially, the most viable source of non-Russian gas for the EU in the region is Iran, and will remain so for decades... Adding to the complexity of the situation is the coming gas shortage in the United States. With consumption overtaking both production and current imports, the United States too will be forced to turn to Russia, Qatar, and possibly Iran for LNG in a few years. How much gas will be left for EU consumers once the United States joins the LNG queue is unclear, but it is obvious that the current supplies have limits."
Turkey: Ankara Seeks Role As East-West 'Energy Bridge'
Radio Free Europe, 27 August 2007

"Iraqi and Syrian oil ministers agreed on Wednesday to repair and subsequently reopen a key pipeline between their two countries that connects Iraq's oil-rich Kirkuk region and a Syrian port. The agreement between Iraqi Oil Minister Hussain al-Shahristani and his Syrian counterpart Sufian Allaw came at the end of a three-day visit here by a top Iraqi delegation, headed by Prime Minister Nouri al-Maliki. The 880-kilometer (550 mile) pipeline links Iraq's northern oil fields to the Syrian port of Baniyas, and reopening it would allow Iraq to use a second export terminal on the Mediterranean Sea. Currently, Iraq exports nearly all its oil through the Persian Gulf. The main export pipeline from Kirkuk to the Turkish Mediterranean port of Ceyhan has been mostly closed due to sabotage. The pipeline to Baniyas was built in the 1950s but was bombed by U.S. forces during the 2003 invasion that toppled Saddam Hussein."
Iraqi, Syrian oil ministers agree to reopen key pipeline
Associated Press, 22 August 2007

"The International Energy Agency yesterday warned that the Middle East runs the risk of becoming a net importer of fuel oil at precisely the time worldwide output of the product could diminish. Fuel oil demand in the region, which sits on nearly three-quarters of the world’s proven reserves of crude oil, has reportedly spiked on the back of hefty power generation requirements as gas supplies become insufficient to meet electricity demand, the IEA said. The region’s rapid economic expansion coupled with the start of Summer has led to power shortages in Kuwait, where a power-rationing programme during peak hours is in place, and in the United Arab Emirates, where industrial users are reportedly turning to coal and rolling blackouts have occurred in the emirates of Abu Dhabi and Sharjah, the IEA added. For some countries, such as Kuwait, Saudi Arabia or Iran, turning to fuel oil for power generation may make economic sense, especially where power plants are close to refineries."
Middle East risks fuel oil crunch period, says IEA
Business Intelligence Middle East, 12 August 2007

"The United States has asked Israel to check the possibility of pumping oil from Iraq to the oil refineries in Haifa. The request came in a telegram last week from a senior Pentagon official to a top Foreign Ministry official in Jerusalem. The Prime Minister's Office, which views the pipeline to Haifa as a 'bonus' the U.S. could give to Israel in return for its unequivocal support for the American-led campaign in Iraq, had asked the Americans for the official telegram. The new pipeline would take oil from the Kirkuk area, where some 40 percent of Iraqi oil is produced, and transport it via Mosul, and then across Jordan to Israel. The U.S. telegram included a request for a cost estimate for repairing the Mosul-Haifa pipeline that was in use prior to 1948. During the War of Independence, the Iraqis stopped the flow of oil to Haifa and the pipeline fell into disrepair over the years. The National Infrastructure Ministry has recently conducted research indicating that construction of a 42-inch diameter pipeline between Kirkuk and Haifa would cost about $400,000 per kilometer. The old Mosul-Haifa pipeline was only 8 inches in diameter. National Infrastructure Minister Yosef Paritzky said yesterday that the port of Haifa is an attractive destination for Iraqi oil and that he plans to discuss this matter with the U.S. secretary of energy during his planned visit to Washington next month. Paritzky added that the plan depends on Jordan's consent and that Jordan would receive a transit fee for allowing the oil to piped through its territory. The minister noted, however, that 'due to pan-Arab concerns, it will be hard for the Jordanians to agree to the flow of Iraqi oil via Jordan and Israel.' Sources in Jerusalem confirmed yesterday that the Americans are looking into the possibility of laying a new pipeline via Jordan and Israel. (There is also a pipeline running via Syria that has not been used in some three decades.) Iraqi oil is now being transported via Turkey to a small Mediterranean port near the Syrian border."
U.S. checking possibility of pumping oil from northern Iraq to Haifa, via Jordan
Haaretz, 1 August 2007

"Royal Dutch Shell Plc (RDSa.L: Quote, Profile , Research) plans to build an oil sands upgrading complex at its Edmonton, Alberta, refinery that could cost as much as C$27 billion ($25 billion), putting it among Canada's costliest projects, it said on Monday. Shell said its proposed Upgrader 2 would be built in four 100,000 barrel a day stages, processing tar-like bitumen from its Athabasca Oil Sands Project in northern Alberta -- which is already undergoing a multibillion-dollar expansion -- as well as its steam-driven oil sands projects in the same region. The proposal is the first major project announcement for the Anglo-Dutch oil major since it bought out the minority shareholders of Shell Canada last spring and consolidated the Canadian company into its worldwide operations."
Shell applies to build C$27 bln oil sands plant
Reuters, 30 July 2007

"Petroleos Mexicanos (PEMEX) announced that oil reserves may run out in seven years. 'Supplies of this economically exploitable resource are running out,' informed a report sent by the state owned company to the United States stock market. Until December 31, 2005 the report says proven reserves were about 8.978 billion barrels, while yearly production was 1.322 billion tons. If this rhythm continues oil will run out in the time stipulated. El Universal newspaper reports that experts of the PFC Energy Advisory company based in Washington pointed out that investments for PEMEX exploration is also running out of time. Even if heavy investments were made now, new oil fields would take from six to eight years to be ready and, consequently, Mexico may have to import oil to satisfy the internal market, it warned. The newspaper quotes Carlos Ramirez, PEMEX spokesman as saying that if necessary investments were made, this would provide another 2.9 more years to what is foreseen with the proven developed reserves. The director of the state owned company, Jesus Reyes, insisted that these are difficult moments due to a reduction of production in Cantareli, the main oil field in the country."
Mexican Company Predicts End of Oil
Prensa Latina (Cuba), 27 July 2007

"The $100-a-barrel oil that Goldman Sachs Group Inc. said would prevail by 2009 may be only a few months away. Jeffrey Currie, a London-based commodity analyst at the world's biggest securities firm, says $95 crude is likely this year unless OPEC unexpectedly increases production, and declining inventories are raising the chances for $100 oil. Jeff Rubin at CIBC World Markets predicts $100 a barrel as soon as next year....'Ultimately, the key to the outlook going forward is when will Saudi Arabia ramp up production,' he said in an interview. 'If you have a situation in which inventories globally get drawn to critically low levels, the volatility in this market is likely to explode, which significantly increases the probability of $100 oil.' Oil might slip to $73.50 if OPEC were to start producing more now, he said....The cost of finding and pumping oil is rising steadily, convincing analysts such as Rubin and Deutsche Bank AG chief energy economist Adam Sieminski that higher prices will last. Shortages of deepwater drilling ships and rigs has pushed daily rents to records, and the skilled workers needed to run rigs, weld pipes, pilot vessels, fix refineries and build oil-sands projects command ever-higher wages."
$100 Oil Price May Be Months Away, Say CIBC, Goldman
Bloomberg, 23 July 2007

"Humanity is approaching an unprecedented crisis when not enough oil and gas will be produced to keep industrial civilisation running, the world's top oilmen warned last week. The warning – which is being hailed as a 'tipping point' on both sides of the Atlantic – marks the first time that the industry has accepted that it may soon no longer be able to meet demand for its products. In Facing the Hard Truths about Energy, it gives authoritative support to concern about impending shortages, following a similar alert by the International Energy Agency less than two weeks ago. The 420-page report, the most comprehensive study ever carried out into the industry, has been produced by the National Petroleum Council, a body of 175 authorities that reports to the US government. It includes the heads of the world's big oil companies including ExxonMobil, Chevron, ConocoPhillips, Occidental Petroleum, Shell and BP. Oil and gas may run short by 2015, say industry experts.... It says that 'many observers think that 80 per cent of existing oil production will need to be replaced by 2030' to keep up present supplies 'in addition to volumes required to meet existing demand.' But, it adds, there are 'accumulating risks to replacing current production and increasing supplies'.... And the crunch could come sooner, with oil production becoming 'a significant challenge as early as 2015'. This chimes with the International Energy Agency's prediction that oil supplies could become 'extremely tight' in five years. Chris Skrebowski, editor of the Energy Institute's Petroleum Review, said the report's publication showed the industry 'fessing up that it really has a problem on its hands'. Until now, he said, 'companies, full of share options, have been terrified of frightening the markets' by revealing the truth."
Oil and gas may run short by 2015, say industry experts
Independent On Sunday, 22 July 2007

"When executives from the world's largest oil companies say we need to cut back on our consumption, it should serve as the ultimate wake-up call about a looming energy crunch. Yesterday, the former chairman of Exxon Mobil Corp. and the current chairman of Chevron Corp. led an urgent call for dramatic increases in vehicle fuel mileage standards and the rapid adoption of ethanol and other biofuels. Without those measures and a host of others, the U.S. could face a punishing energy crisis by 2030 that would spare no energy consuming nation. The call to arms was issued in Washington yesterday by a committee of the National Petroleum Council, which was chaired by former Exxon chairman Lee Raymond. He was joined on it by Chevron chairman and chief executive officer David O'Reilly.With U.S. Energy Secretary Sam Bodman in attendance, the council released an exhaustive report on U.S. and global energy challenges over the next 25 years, and offered a series of 'hard truths' about the massive investment, both public and private, needed to meet rising energy demand. The committee warned that there will need to be tremendous spending on exploration, development and infrastructure to discover new reserves. And it said that rising demand from emerging economies could drive crude prices well above the current, near-record levels of about $75 (U.S.) a barrel. 'This demand may outpace timely development of new supply sources, thereby pressuring prices to rise,' the report said.... The oil executives issued their standard call for more access to potential U.S. reserves offshore and in protected wilderness areas. But they also broadened their list of recommendations to include venturing into areas far less typical for the conservative industry. They urged the U.S. to moderate its own demand growth by increasing efficiency in energy use, including new mileage standards for automobiles, building codes for residential and commercial structures, and energy consumption standards for computers and other digital equipment. They called for a doubling of the fuel mileage standard on cars and light trucks by 2030, a measure that would save five million barrels of oil a day. The report urged a rapid expansion of ethanol and biodiesel use, saying the country will have to diversify its fuel mix to lessen its dependence on imported oil."
Oil executives sound alarm about fuel use
Globe and Mail, 19 July 2007

"Oil ruled the 20th century; the shortage of oil will rule the 21st.... Last Tuesday the lead story in The Financial Times was the latest report from the International Energy Agency. The FT quoted the IEA as saying: 'Oil looks extremely tight in five years’ time,' and that there are 'prospects of even tighter natural gas markets at the turn of the decade'. For an international agency, that is inflammatory language.... 27 of the 51 oil-producing nations listed in BP’s Statistical Review of World Energy reported output declines in 2006. One projection of world crude oil production actually forecasts a 10 per cent reduction in total world output between 2005 and 2015. That would be a revolution..... Some analysts think that the peak oil moment has already been reached; some still think that it will not come until 2020 – which is itself only 12 years away. Market trends and the statistics both support the IEA’s view that consumption is accelerating and supplies falling faster than expected. Of course, if the 'crunch' point is only five years’ away for oil, and closer for natural gas, it has, for practical purposes, already arrived....The shortage of oil and natural gas, relative to demand, had already changed the balance of world power. Historians may well conclude that the US decision to invade Iraq was primarily motivated by the desire to gain physical control of Iraq’s oil and to provide defence support to other Middle Eastern oil powers. Political motivations are always mixed, but oil is an essential national interest of the United States. If the US is now deciding to withdraw from Iraq, the price will have to be paid in terms of loss of access to oil.... The world is coming to the end of the age of oil, which produced its own technology, its balance of power, its own economy, its pattern of society. It does not greatly matter whether the oil supply has peaked already or is going to peak in five or 12 years’ time. There is a huge adjustment to be made. There will be some benefits, including higher efficiencies and perhaps a better approach to global warming. But nothing will take us back towards the innocent expectation of indefinite expansion of the first months of the new millennium."
Lord William Rees-Mogg
Are these the last days of the Oil Age?
London Times, 16 July 2007

"PetroChina Co., the nation's biggest oil company, has dropped a plan to ship oil sands through a $4 billion oil link across Canada because of construction delays. The company hasn't renewed a memorandum of agreement, Yiwu Song, a vice president of the parent China National Petroleum Corp., said at an energy conference in Calgary yesterday. The company will focus on processing Venezuelan oil, he said. Enbridge Inc., Canada's second-largest pipeline operator, has said plans to build the pipeline, known as the Gateway, have been delayed and may not start until as late as 2014. PetroChina in 2005 signed a tentative accord to ship 200,000 barrels a day through the pipeline to the west coast of British Columbia, where it will be shipped to Asia. 'It will take at least 10 years to start,' said Song. 'We just cannot play this game too long. We have to focus on our big businesses.'... China National Petroleum will slow investment in Canada and focus on processing oil from Venezuela, Song said. China is building two refineries to handle increased oil imports from that country, he told reporters. The nation, the world's second-biggest energy consumer, plans to process 500,000 barrels a day of Venezuelan oil within five years, he said.'''
PetroChina Drops Plans to Ship Oil Sands Through Alberta Link
Bloomberg, 13 July 2007

"Not only has the Paris-based International Energy Agency (IEA), the energy watchdog of the Organisation for Economic Co-operation and Development (OECD) countries, warned in its latest medium-term oil market report that a market crunch is looming over around 2012, but some OPEC producers are breaking even more negative news. After a short analysis hype in the beginning of 2006, analysts have been forgetting to cover OPEC countries currently battling reserve issues. Kuwait officials have stated that the government is studying a request by lawmakers to disclose the size of its oil reserves. Kuwait Minister of State for Cabinet Affairs, Faisal Al-Hajji, said the issue is still under review. Analysts have lingering doubts that the reserves could be sharply lower than official estimates. Most analysts’ focus will be on the overall Kuwaiti message in the coming days... Since January 2006, when Petroleum Intelligence Weekly (PIW) published a report stating that the internal records of Kuwait only show 48 billion barrels of reserves as opposed to official figures of 99 billion, the scale of reserves in OPEC's fifth largest producer remains sensitive. If PIW's reserve figures are based on facts, the Kuwaiti differences will mean a 4% decrease on global proven oil reserves. The Kuwaiti case does not stand on its own, as energy analyst Matthew Simmons and others have been targeting Saudi oil reserves volumes for years. Until now, Arab countries always have refused to discuss these issues, but some cracks are currently showing. Some Kuwaiti officials broke rank after former Oil Minister Sheikh Ali Al-Jarrah Al-Sabah, who resigned in late June, sparked some confusion by telling daily Al Jarida in May he could not deny the PIW estimates, while at the same time questioning how reserves were defined. Depending on definition, a wide range of estimates could be correct, he said. These developments showed their ugly face at the same moment that the IEA issued a stark new warning to the public about future oil and gas production volumes. The energy agency has reported that straining gas output, leading to rising competition for gas substitutes such as fuel oil, will push up energy prices while crude oil supplies remain stretched beyond 2012. Agency analysts stated that although fuel oil has historically been the substitute in the event of gas supply problems, the combination of declining spare oil capacity after 2010 and delayed new output will tighten fuel oil supplies, raising 'serious concerns' for gas market security. Increased global competition and constrained export volumes will lead without doubt to higher price levels. In addition to worrisome gas issues, crude oil is already under pressure from rising demand, especially from energy-intensive industrialization efforts taking place in Asia and the Middle East. In the Middle East, consumption has increased substantially to about three times higher than in average OECD countries. The IEA has predicted that demand will increase on average by 2.2% per year between 2007 and 2012, which is substantially higher than the 2% before. Combined Asian and Middle Eastern demand is even expected to surpass OECD demand by the middle of the next decade. The IEA warned that the future oil market will be under extreme pressure, as the demand for crude oil in the Middle East and other OPEC countries will constrain possible gap filling for other regions. Until now, growing global demand has largely come from non-OPEC regions that wanted to be filled by OPEC's increased production of oil and gas. This has now changed dramatically, as part of the new crude oil and gas production is used by local consumers. In the coming years, the situation will only increase, as more and more OPEC countries, even Saudi Arabia, will have to battle lower production levels and increased oil field depletion rates. Some analysts have said that the current depletion rate of Saudi Aramco fields, the largest in the world, has increased from 8% in 2005 to around 12-14% in 2006. This would mean that new fields coming in production will only be there to cover lost production volumes elsewhere."
Kuwait and IEA Show Declining Oil Production Future
Resource Investor, 10 July 2007

"The U.K. parliament formed a group to study peak oil, the theory that world oil production is approaching its zenith, as British lawmakers face up to the country's future as an energy importer. The All-Party Parliamentary Group on Peak Oil and Gas, which held its first meeting June 26, comprises 32 members of the House of Commons, or lower chamber, and seven from the House of Lords, or upper chamber. It aims to collate predictions for when production may peak and consider the implications for energy policy, rather than push a particular view, said the group's chairman, John Hemming, a Liberal Democrat MP for Birmingham Yardley, central England. 'Will oil production peak?' Hemming said in a telephone interview. 'Yes, it will. Will it peak in my lifetime is a question worth considering. If you look at the issue of being energy-resource constrained, you use energy more efficiently. We need to aim to be more economical with energy.' The group will next meet July 24, he said in an e-mail today. Interest in peak oil has risen as the price of oil has doubled over the past three years and as consumers become more reliant on energy supplies from Russia, the Middle East and Africa. Politicians are also growing more concerned about the impact on the climate of burning fossil fuels.... Oil production growth among non-OPEC nations will increasingly come in the form of so-called non-conventional oils, such as heavy oil, oil sands and biofuels, rather than the typical crude oil, the IEA said in its Medium-Term Oil Market Report, published yesterday."
U.K. Parliament Members Form `Peak Oil' Study Group
Bloomberg, 10 July 2007

"Russian oil production may level out from 2010 to 2012 and stall until the middle of the decade, the International Energy Agency said Monday. The IEA, adviser to 26 industrialized consumer nations, said it had based its forecast on a study of the top 20 development projects through to 2012 and an assumed 3 percent annual net decline rate for baseload production. Using this calculation, output would reach around 10.6 million barrels per day by 2010, from 9.9 million bpd in the first quarter of this year. Output would then dip to 10.5 million bpd by 2012. 'An uncertain Russian investment climate and tight drilling and service capacity justify caution on new project start-ups,' the IEA said in its Medium-Term Oil Market Report."
IEA Sees Oil Output Plateau
Reuters, 10 July 2007

"The world faces an energy squeeze as soaring demand for fuel exceeds the rate of growth in the supply of crude oil, the West’s leading energy forecaster has predicted. In a gloomy appraisal of the global oil balance, the International Energy Agency yesterday predicted a world of increasing market tightness beyond 2010. The world faces a 'supply crunch' by 2012, according to the agency’s Medium-Term Oil Market Report, with weak increases in oil output from nonOpec countries colliding with strong demand and diminished spare capacity within the cartel of oil producers....Cost overruns, project delays and manpower problems will continue to hinder the oil industry’s ability to raise its game. Civil strife in Nigeria and Iraq will continue to constrain Opec supply and the IEA predicts no expansion in Iran or Venezuela. That will keep the lid on Opec’s ability to expand its surplus oil buffer, which the IEA reckons will shrink from 3 million barrels a day to 1.5 million in 2012."
World facing oil ‘supply crunch’ as demand soars, agency warns
London Times, 10 July 2007

"The world is facing an oil supply 'crunch' within five years that will force up prices to record levels and increase the west’s dependence on oil cartel Opec, the industrialised countries’ energy watchdog has warned. In its starkest warning yet on the world’s fuel outlook, the International Energy Agency said 'oil looks extremely tight in five years time' and there are 'prospects of even tighter natural gas markets at the turn of the decade'....Oil demand will grow at an annual rate of 2.2 per cent during the next five years, up from a previous estimate of 2 per cent, to reach 95.8m barrels a day in 2012. China, the Middle East and other emerging countries will lead the increase. Rex Tillerson, the chairman and chief executive of ExxonMobil, said recently that he thought non-Opec oil production was close to levelling off. He told the FT: 'We still see capacity for a little more growth, but pretty modest, and then in our own energy outlook it begins to plateau. And that results then in this call on Opec.' UK oil production is set to suffer a dramatic decline from today’s 1.7m barrels a day to just 1.0m b/d in 2012, according to the IEA. The IEA estimates Opec would have to supply about 36.2m b/d in 2012, up from today’s 31.3m b/d. That would reduce the oil cartel’s spare capacity to a 'minimal level' of 1.6 per cent of global demand, down from 2.9 per cent in 2007. The IEA said that supply was falling faster than expected in mature areas, such as the North Sea or Mexico, while projects in new provinces such as the Russian Far East, faced long delays. Meanwhile consumption is accelerating on strong economic growth in emerging countries. The problem is exacerbated by the fact that supply from non-members of the Organisation of the Petroleum Exporting Countries will increase at an annual pace of 1 per cent, or less than half the rate of the demand rise. The widening gap between rising consumption and lagging non-Opec supply will force Opec to sharply increase its production in the next five years."
World will face oil crunch ‘in five years’
Financial Times, 9 July 2007

"World oil demand will rise faster than expected, while supplies will remain tight, the latest International Energy Agency (IEA) report has warned. The IEA predicted demand would rise by an average 2.2% a year between 2007 and 2012, up from previous estimates of 2%. It added that geo-political tensions and a lack of spare capacity in Opec production would also limit supplies.... In its report, the IEA argued that biofuel production would hit 1.8 million barrels by 2012, more than double 2006 levels. However, while supplies of the green fuel are set to surge, it is likely to remain marginal with just a 2% slice of the overall energy market. It also echoed warnings issued in an Organisation for Economic Development report that rapidly growing biofuel market will increase the price of certain feedstocks - such as sugar and corn - over the coming year. But with forecasts predicting world economic growth to increase by 4.5% a year, the report argued that oil demand could soar to 95.8m barrels a day (bpd) in 2012 from 81.6m now. At the same time it predicted production from oil cartel Opec would fall, slipping by 2m bpd in 2009, while it also cut supply forecasts for non-Opec countries by 800,000 bpd. 'Despite four years of high oil prices, this report sees increasing market tightness beyond 2010,' the IEA said. 'It is possible that the supply crunch could be deferred - but not by much.'"
Oil supplies 'face more pressure'
BBC Online, 9 July 2007

"A mad scramble is under way for Arctic riches: fish, diamonds, oil and gas. Two years ago Canada incensed the Danes by flying its flag from Hans Island; both claim sovereignty. America and Russia are quarreling over the Beaufort Sea while Norway and Russia wrangle over the Barents Sea. Underlying the disputes is the certain knowledge that vast oil and gasfields lie beneath the ice. This is the last frontier for oil and gas and the irony is that it may not contain quite the scale of riches once believed. The US Geological Survey estimated that a quarter of the world’s undiscovered hydrocarbons lay in the Arctic. A recent study by Wood Mackenzie suggests it may be more like one-fifth and mostly gas.... The physical danger is great and the cost gigantic, $1 trillion is a low-ball estimate to recover the resource, reckons Wood Mackenzie. But whatever the price, the oil majors must push north. The door to the Middle East is shut, biofuels pose a threat to food production and coal is dirty. If Shell, BP and ExxonMobil are to remain open for business, the Arctic is the only frontier left."
Battle for final frontier
London Times, 6 July 2007

"A new California law aimed at global warming threatens to slow development of alternative oil projects in the United States and Canada, a report said Friday. The climate change law holds energy companies responsible for all phases of oil production, including extraction and transportation, the Christian Science Monitor reported. That puts at risk oil-sand, oil-shale, and coal-to-oil projects because extracting these alternative sources of oil requires so much energy that their "carbon footprint" may outweigh their benefits, the Monitor said."
Alternative oil projects threatened
United Press International, 6 July 2007

"When you think of oil, you think of the Middle East. But our neighbor to the north has the second-largest oil reserves in the world behind Saudi Arabia. Canada boasts being the world's third-largest producer of natural gas and ranks ninth in crude oil production. Canadian oil production is projected to grow from 2.6 million barrels a day in 2006 to 4.6 million barrels per day by 2015 and to more than 5.3 million by 2020. That's according to the June 2007 crude oil forecast report from the Canadian Association of Petroleum Producers. CAPP attributes most of the growth to increasing production from the oil sands, which have only begun to be tapped."
A Way Into Canada's Crude And Oil Sands
CNN, 6 July 2007

"At exactly the moment that demand for energy is surging, more and more of the world's conventional oil fields are going into decline. So supplies of oil and gas that are easy to extract will struggle to keep up with demand, which means increasing use of unconventional fossil fuels, such as oil sands, including and especially coal. Coal is more than twice as CO2 intensive as natural gas, and abundantly available.... it will take a decade to test the carbon-capture technology. Then we have to work things out with governments so we can make it [economically] worthwhile... "
Royal Dutch Shell CEO Jeroen van der Veer
Shell CEO Says Conservation Isn't Enough
US News And World Report, 5 July 2007

"Oil and gas companies are forecast to invest up to �1.5bn less in North Sea exploration this year despite the expected surge in Britain's energy needs. Increased costs and high taxation is damaging Britain's ability to remain competitive and attract investment, according to Oil & Gas UK, the industry trade body. In its annual economic report, published yesterday, Oil & Gas UK says that total expenditure in the UK Continental Shelf is expected to fall from �11.5bn to between �10bn-�10.5bn this year.... A shortage of exploration equipment, due to worldwide demand, and a 50pc tax take has made some North Sea projects uneconomic. The Treasury is currently in talks with energy firms about the North Sea tax regime, with a report expected in September at the earliest. The decline in tax revenues could force the Government to act. Almost two years ago the Treasury forecast revenues of �11bn this year, whereas Oil & Gas UK predicts the actual figure will be nearer �8bn. Despite worries about investment, oil and gas production is set to rise in 2007 for the first time since 1999, but by less than originally forecast. Oil & Gas UK said that output is projected to rise to 3m boe a day this year, up from the 2.9m boe a day in 2006. The group originally forecast of 3.3m boe a day for 2007.British North Sea production peaked in 1999 when it hit 4.5m boe a day."
Spiralling costs hit North Sea investment
Daily Telegraph, 5 July 2007

"Increasing oil tanker activity in B.C.’s northern waters has West Coast NDPers calling on Ottawa and Victoria to 'formalize' a long-standing moratorium on tanker traffic and offshore exploration. Victoria MP Denise Savoie, Nanaimo-Cowichan MP Jean Crowder, Vancouver-Hastings MLA Shane Simpson and Victoria-Hillside MLA Rob Fleming gathered at Clover Point to accuse the federal Conservatives and B.C Liberals of allowing the resumption of large-scale oil shipping in violation of an informal ban that has been in place for more than 30 years. Savoie said since April 2006 at least 10 oil tankers have arrived in Kitimat loaded with liquefied natural gas and condensate, both petroleum by-products whose uses include diluting petroleum reserves trapped in the Alberta tar sands. 'There have been tankers carrying 350,000 barrels of condensate that’s used to dilute the tar and this is happening under the radar,' she said. 'It’s urgent that we formalize the moratoria so these long-standing policies are clear and official.'"
Oil tanker traffic ‘under radar’ along B.C. coastline
Ladysmith Chronicle, 3 July 2007

"The energy industry warned yesterday that government targets of keeping Britain's oil and gas production at 3m barrels a day by 2010 look like being missed. North Sea competitiveness is falling and financial backers are losing confidence in the wake of tax increases introduced 18 months ago. Civil servants have been working with oil companies to find ways to boost output offshore, but the 2007 Economic Report issued by the industry organisation Oil & Gas UK says the goal looks like being missed after five years of rising hopes. 'This shift is indicative of reduced confidence among investors - it now looks as though only 2.6m barrels of oil equivalents will be produced every day in 2010,' argues the report, increasing fears that the UK would become dependent on Russian and other foreign gas imports. The UK pumped 2.9m barrels a day of oil and gas on average during 2006, 9% lower than the year before despite a major increase in investment to �11.5bn. Half of this money was needed just to keep the fields running at a time of rising costs for equipment, people and services."
North Sea is running too dry to meet target
Guardian, 4 July 2007

"The decline in oil and gas production in the UK North Sea continued in April, despite record investment in 2006, in what economists at Royal Bank of Scotland said was another sign that the province is maturing rapidly. The latest oil and gas index from Royal Bank shows that combined average daily oil and gas production for the UK Continental Shelf stood at 2,823,141 barrels of oil equivalent per day (boe/d) in April. This was about 2.3% lower than in March, ending a run of six consecutive monthly increases. The underlying rate of production continued on a firmly downward trend, falling 7.8% compared with April last year....Against the backdrop of a continuing surge in investment in response to buoyant energy markets, the figures show that operators are having to work increasingly hard to try to maintain production. An increasing share of output on the UKCS is coming from fields that have come off plateau production levels and from smaller fields. Oil production was down 0.8% on the month at 1,384,740 (bpd) and down 12.1% on the year.... UK natural gas production decreased 3.8% to 8170 million standard cubic feet per day (mmcfd) compared to March and fell 3.2% on the year."
North Sea output continues to drop despite record investment
The Herald, 3 July 2007

"Q. According to the Department of Energy, the United States will consume 28 percent more oil and 19 percent more natural gas in 2030 than it did in 2005. Where will we find all that oil and gas?
A. I question whether the supply will be developed to meet those demand expectations. I believe demand is going to be constrained by supply.
Q. Drivers are concerned about rising gas prices. What can American drivers expect to pay at the pump in the short term, medium term and long term?
A. I would like to see gasoline prices decline. However, I believe that is somewhat unrealistic. Energy costs are going to continue to escalate as a result of the cost it takes to add new resources of energy."
Interview with chairman and chief executive of ConocoPhillips, James J. Mulva
Oil Giant Sees Some Strains in the System
New York Times, 30 June 2007

"The House late Wednesday passed an Interior Department budget for 2008 that could negatively impact oil and gas development. The Interior appropriations bill - which passed by a 272-155 vote - would force re-negotiation of 1998-99 oil and gas leases that omitted royalty price thresholds....An amendment to the bill approved by the House would also slow Interior's plan for oil shale development. Rep. Mark Udall's, D-Colo., amendment would prohibit federal dollars for preparation of final rules for commercial lease sales. The department's Bureau of Land Management last August initiated the first steps towards a national oil-shale lease sale, posting a notice inviting public comments for proposed rule-making for oil-shale. Royal Dutch Shell is one of several companies working on new shale extraction technology. Industry experts estimate more than 1 trillion barrels worth of oil may be extracted from the shales, but companies have yet to develop technology that would make development economically feasible or environmentally sustainable."
House OKs Interior Bill Forcing Renegotiation Of Oil Leases
Dow Jones Newswires, 28 June 2007

"Petro-Canada, the third-largest oil company in Canada, and its partners will spend C$26.2 billion ($24.6 billion) on an oil-sands project in northern Alberta that's one of the world's most costly energy developments. The Fort Hills project is expected to produce 280,000 barrels of oil a day from the tar-like deposits by 2014, with output starting in the second quarter of 2012, the Calgary-based company said today in a statement. The project, under development for more than five years, will tap oil reserves second only to those in Saudi Arabia. Producers are turning to unconventional sources for oil such as Alberta's tar sands to replenish reserves as more easily tapped reservoirs become harder, and more costly, to find. Instability in oil-producer Nigeria and efforts by Russia and Venezuela to take control of energy projects from foreign companies makes Canada an attractive alternative. 'It's a safe supply of oil,' said Chris Feltin, an analyst at Calgary brokerage Tristone Capital Inc. who rates Petro- Canada's shares at ``outperform'' and owns none. 'Look at the people who left Venezuela this week. It wouldn't surprise me to see Exxon and Chevron try to get a bigger position in the oil sands now.' Exxon Mobil Corp. and ConocoPhillips are leaving Venezuela after failing to reach agreement with the government of President Hugo Chavez over an increased government stake in heavy-oil projects in the country.... Petro-Canada, UTS Energy Corp. and Teck Cominco Ltd. spent months reviewing the Fort Hills design to reduce costs. The project will be built in two stages to ease demand for skilled construction workers. A final decision on proceeding with the project will be made in the third quarter of 2008, Petro-Canada said.... Including previous spending and planned expansions, Fort Hills is the fourth-most-costly oil-sands project in Canada, said Pauline Dingwall, an analyst at Edinburgh-based consultant Wood Mackenzie. Joint venture Syncrude Canada Ltd. ranks first at C$44 billion, followed by projects by Shell and Suncor Energy Inc., she said in an interview."
Petro-Canada Plans C$26.2 Billion Oil-Sands Project
Bloomberg, 28 June 2007

"If Iraqi production does not rise exponentially by 2015, we have a very big problem, even if Saudi Arabia fulfills all its promises. The numbers are very simple, there's no need to be an expert.... Within 5 to 10 years, non-OPEP production will reach a peak and begin to decline, as reserves run out. There are new proofs of that fact every day. At the same we'll see the peak of China's economic growth. The two events will coincide: the explosion of Chinese growth, and the fall in non-OPEP oil production. Will the oil world manage to face that twin shock is an open question.... I really hope that consuming nations will understand the gravity of the situation and put in place radical and extremely tough policies to curb oil demand growth."
Fatir Birol, Chief Economist, International Energy Agency
Le Monde, 27 June 2007

"Commercial production of oil shale in western Colorado will require new power plants that will greatly increase pollution, according to an analysis released Monday by a coalition of conservation groups. The same groups that two weeks ago publicized the vast water needs for commercial oil shale production attacked the power needs for oil shale production as envisioned by the federal government. One million barrels per day will require an estimated 12,000 megawatts of capacity annually, the groups said. That is three times all the electricity produced in Colorado in 2005. A spokeswoman for Shell, the company doing the most extensive in-the-field oil shale research, said the company is working on lowering its power needs from the current estimate. 'We have acknowledged in the past that our method is power-intensive,' said Jill Davis. 'We are working on ways to reduce that.' The environmental coalition that has been highlighting the potential impacts of commercial oil shale development is arguing that decisions about commercial leasing of federal lands for oil shale should be slowed down."
Oil shale power needs stir alarm
Denver Post, 26 June 2007

"The chief executive of Royal Dutch Shell today calls for a 'reality check'. Writing in The Times, Jeroen van der Veer takes issue with the widespread public opinion that green energy can replace fossil fuels. Shell’s chief gives warning that supplies of conventional oil and gas will struggle to keep pace with rising energy demand and he calls for greater investment in energy efficiency. Instead of a great conversion to wind power and solar power, Mr van der Veer predicts, the world will be forced into greater use of coal and much higher CO2 emissions, 'possibly to levels we deem unacceptable'.....Mr van der Veer casts doubt today on the oil and gas industry’s ability to keep up with accelerating demand. 'Just when energy demand is surging, many of the world’s conventional oilfields are going into decline,' he writes. Although there is no shortage of oil and gas in the ground, Mr van der Veer says, the industry currently lacks the technology to recover even half of that resource."
Energy crisis cannot be solved by renewables, oil chiefs say
London Times, 25 June 2007

"We all know that global demand for energy is growing, but the reality of how fast hasn’t really sunk in. The first hard truth is that demand is accelerating. Energy use in 2050 may be twice as high as it is today, or higher still.... Last year, China enlarged its electricity capacity by roughly the equivalent of Great Britain’s entire stock of power stations.....The second hard truth is that the growth rate of supplies of 'easy oil', conventional oil and natural gas that are relatively easy to extract, will struggle to keep up with accelerating demand. Just when energy demand is surging, many of the world’s conventional oilfields are going into decline.... The world now produces 135 million barrels oil equivalent a day of oil and natural gas. We could still raise that number with new technologies, but only gradually and certainly not indefinitely....The world’s energy system is entering a turbulent phase, and the only question is: how turbulent? A cooperative world will respond more effectively than a fragmented one... The alternative is a global market failure, and future generations would pay the price."
Jeroen van der Veer, Chief executive of Royal Dutch Shell
High hopes and hard truths dictate future
London Times, 25 June 2007

"With global oil production virtually stalled in recent years, controversial predictions that the world is fast approaching maximum petroleum output are looking a bit less controversial.... Alternatives are still a decade away from meeting incremental demand for oil. With nothing to fill the gap, global economic growth would slow, stop, and then reverse; international tensions would soar as nations seek access to diminishing supplies, enriching autocratic rulers in unstable oil states; and, unless other sources of energy could be ramped up with extreme haste, the world could plunge into a new Dark Age. Even as faltering economies burned less oil, carbon loading of the atmosphere might accelerate as countries turn to vastly dirtier coal..... recognizing that nations will turn to cheap coal (recently, 80% of growth in coal use has come from China), more work is needed to defang this fuel, which produces more carbon dioxide per ton than any other energy source. Even if the peakists are wrong, we would still be better off taking these actions. And if they're right, major efforts right now may be the only way to avert a new Dark Age in an overheated world."
From Peak Oil To Dark Age?
Business Week, 25 June 2007

"Oil prices have a 'substantial' risk of surging higher and boosting inflation because non-OPEC production may soon peak, the Bank for International Settlements said in its annual report.... The 244-page report said investment hasn't increased oil supplies, raising concerns that production could peak from nations outside the Organization of Petroleum Exporting Countries..... The International Energy Agency, an adviser to energy- importing nations, this month cut its 2007 estimate for non-OPEC production by 110,000 barrels a day to 50.2 million barrels a day, citing project delays."
Oil Price Surge a Risk as Non-OPEC Production Peaks, BIS Says
Bloomberg, 24 June 2007

"Petroleos Mexicanos, the state-owned oil monopoly, said crude production fell 6.6 percent in May from a year earlier and dropped to its lowest this year as the company struggles with declining output from its Cantarell field. Daily output was 3.11 million barrels, down from 3.33 million in May 2006, the Mexico City-based company said today in a report on its Web site. January's production of 3.14 million barrels was the previous low for the year. Cantarell, the world's third-largest oil field, produced 1.58 million barrels per day, a 15 percent decline from 1.86 million barrels daily in May last year. May's daily production at the offshore field was lower than 1.59 million barrels in April. Pemex has increased its spending plan this year for exploration and production to 137 billion pesos ($12.7 billion) to increase production from other offshore fields, such as Ku- Maloob-Zaap, to make up for Cantarell's drop. Ghawar in Saudi Arabia is the world's largest oil field, followed by Burgan in Kuwait. For the first five months of the year, Cantarell's output has dropped 17 percent from a year earlier to average daily production of 1.58 million barrels. Pemex had estimated a 15 percent drop at the field in 2007."
Pemex Says May Oil Output Falls 6.6% From Year Ago
Bloomberg, 21 June 2007

"The front-runner energy company in the effort to unlock oil shale in northwest Colorado has slowed down its research by withdrawing an application for a state mining permit. Shell spokeswoman Jill Davis said the withdrawal of a permit on one of its three oil-shale research and demonstration leases was done for economic reasons: Costs for building an underground wall of frozen water to contain melted shale have 'significantly escalated.' 'We are being more cautious and more prudent,' Davis said. 'Because of the nature of research you have challenges. With that in mind, it is taking a little longer to build a freeze wall than we planned.'.... Shell's method involves heating shale over a period of years and encircling it in a wall of frozen water to prevent groundwater contamination. Shell has been researching heating methods on its property in the Piceance Basin for several years and is now in the process of freezing a test wall. Research on that wall will continue. Davis said the freeze-wall test should be completed by 2009 or 2010."
Shell shelves oil-shale application to refine its research
Denver Post, 16 June 2007

"Ethanol production has put the Chinese government in an unpleasant bind, as fears rise that the environmentally friendly gasoline additive is also fueling politically dangerous increases in the price of food – particularly pork, a key staple. With the ethanol industry gobbling up a growing share of China's corn harvest, authorities have stomped on the brakes to slow what one official report calls 'blind' investment in distilleries. 'China cannot sacrifice food security for energy: that seems to be the majority view in the government now,' says Zhang Zhongjun, deputy head of the Beijing bureau of the United Nations' Food and Agriculture Organization (FAO).... China's current Five Year Plan sets the goal of using biofuels for 15 per-cent of the country's transport needs by 2020; already gas stations in a number of provinces mix 10 percent ethanol into the gasoline they sell. But critics around the world have recently begun to question the unconsidered effects of large-scale ethanol production, such as increasing competition for human or animal food supplies. And in China, where an estimated 30 million people died in a famine less than 50 years ago, many have reservations about using food for fuel. As ethanol factories large and small have sprung up in China's corn producing regions in recent years, they have begun to compete with animal-feed manufacturers for raw materials. The industrial use of corn nearly doubled between 2001 and 2005, to 23 million tons, according to a study released last December by the National Development and Reform Committee, China's chief economic planning agency. That represented 16.5 percent of the corn harvest in 2005. The result, said the report, is a shortage of corn."
As pork prices soar, Chinese put brakes on corn for ethanol
Christian Science Monitor, 31 May 2007

"President Bush imposed new unilateral US sanctions against the Government of Sudan yesterday for failing to halt what he has branded the genocide in Darfur. 'The United States will not avert our eyes from a crisis that challenges the conscience of the world,' the President said in a brief statement at the White House. The sanctions target 31 government-run companies mainly involved in the lucrative oil industry of Sudan, as well as three individuals..... Mr Bush has been under intense pressure from human rights groups, including conservative Evangelical Christians in America, to take tougher action against Sudan.....The final straw came last weekend, when Mr al-Bashir announced his opposition to the deployment of a 22,000-strong joint UN and African Union peacekeeping force. The Sudanese President said that he would accept only technical and logistical support.... Mr Bush also directed Condoleezza Rice, the US Secretary of State, yesterday to work with allies such as Britain on drafting a new UN resolution for strengthening international pressure on the Sudanese Government. Any such measure faces an uphill battle to be approved by the UN Security Council, where China, which has strong ties with Sudan through oil, is likely to use its veto. Liu Guijin, the new Chinese envoy on Africa, yesterday defended Chinese investment in Sudan as a better way to stop the bloodshed rather than the sanctions advocated by the US and other Western governments. Fresh from his first trip to Sudan since his appointment this month, Mr Liu praised humanitarian efforts."
Bush turns screw on Sudan Government with oil sanctions
London Times, 30 May 2007

"The timing could not have been worse. Within hours of the publication of the energy white paper last Wednesday, BP dealt the government’s plans a blow by scrapping a pioneering carbon capture and storage project. The oil giant pulled the plug because the government had delayed plans to fund such projects. Some observers believe BP’s decision has highlighted the key flaw of the white paper. The government has rightly identified the two great challenges – fighting climate change and securing energy supplies – but it is showing little urgency to tackle a looming energy crisis. Britain faces a serious energy gap by 2015. Up to a third of its generating capacity could be cut as ageing coal and nuclear power stations are closed. At the same time the decline in North Sea oil and gas production will make Britain ever more reliant on imported gas. The government’s response was a package of measures, including support for new nuclear power stations, proposals to encourage investment in renewable power and energy efficiency, and a mandatory carbon-trading scheme for large organisations such as banks and supermarkets. The power industry welcomed the plans, but time is not on the government’s side. The new targets will be hard to meet. The aim of tripling to 15% the amount of electricity coming from renewable sources by 2015 looks incredibly ambitious. Reducing greenhouse-gas emissions by 20% from 1990 levels by 2010 could also be a stretch. New nuclear stations will not be operational for 10 years even with a reformed planning system. The government’s laudable aim is to secure a diverse mix of energy supply. But given the long development timescales, the white paper is likely to increase Britain’s dependency on gas."
GOVERNMENT SHOWS LITTLE URGENCY IN TACKLING LOOMING ENERGY GAP
London Times, 27 May 2007

"The world’s largest untapped oil reserves – in northern Canada – have become the new front line in the battle between environmentalists and the energy industry. Shell, a self-styled 'green' energy company, is to invest billions of pounds in exploiting the Athabasca tar sands.Environmentalists say the tar sands are the world’s dirtiest oil deposits and that refining them generates three to four times more CO2 than normal oil extraction....For western countries, especially America, Canada’s oil is a chance to cut dependence on the Middle East, but the environmental costs could be huge. This is because tar sands comprise viscous bitumen and sand, a mixture that can currently only be extracted by digging it out, destroying the overlying forests. The Athabasca region has already been scarred with huge pits, some hundreds of feet deep. Alongside them lie vast ponds that hold the contaminated sands and other residues left after the oil is removed. Shell, along with Suncor and Syncrude, the other main oil companies in the area, are developing a second extraction method where superheated steam is pumped into the ground to melt the oil so that it can be sucked out as a liquid. However, both processes, and the subsequent refining, require huge amounts of energy – equivalent to up to 30% of the energy contained in the extracted oil.... Shell and its partners are extracting about 150,000 barrels of oil a day but now want a fivefold expansion to 770,000 barrels. A barrel is roughly equivalent to 35 gallons. Suncor and Syncrude are each planning similar expansions to about 500,000 barrels a day. This will require so much energy that the oil firms want to lay a pipeline across 800 miles of forest to tap into gas reserves in the Mackenzie river basin, in Canada’s far north. There are also proposals to build a nuclear power station near the tar sands.... The decision to exploit such oils is provoking a political backlash with Arnold Schwarzeneg-ger, the governor of California, effectively banning them. He has issued a fuel standard demanding a cut in 'carbon intensity', a measure of the CO2 generated in producing and using them. Ten other American states and the European Commission are considering similar measures."
Shell hit by ‘dirty’ Arctic oil furore
Sunday Times, 20 May 2007

"A plunge in American petrol stocks to a 16-year low has prompted the International Energy Agency (IEA) to call on Opec to open its taps and bring more crude oil to the market before the summer. The IEA’s warning and continued disruption to Nigerian oil exports pushed the price of Brent crude up almost a dollar to $66.67. Continued strong petrol demand in America is confounding the oil market and yesterday the Paris-based agency pointed to 930,000 barrel per day (bpd) oil and product stock draw in the first quarter of this year...That followed an 890,000 bpd stock draw in the fourth quarter of last year. The agency is predicting a 1.6 million bpd seasonal jump in oil product demand next month, requiring a significant increase in supplies that the IEA states 'looks unlikely to happen'....The IEA forecasts that nonOpec supplies of crude will increase by one million bpd in this year, recovering from last year’s weak uplift of just 0.4 million bpd and a marginal decline in nonOpec output in 2005. Overall, world demand for oil is expected to rise by 1.8 per cent in 2007, an increase of 1.5 million bpd compared with last year’s rise in demand of 0.7 million bpd. The agency’s greater optimism about nonOpec oil output, after two years of disappointment, is based on new production from Britain, Canada and Australia. However, the IEA admitted that its growth assumption is based on 'normal' operating conditions. The previous year’s underperformance was due to unforeseen disruptions and delays, it argues."
Call for Opec to increase output as US petrol stocks hit 16-year low
London Times, 12 May 2007

"Oil and Gas Executives say government involvement in supporting the development of renewable energy sources is necessary to alleviate the problem of declining oil reserves, according to the results of a survey conducted by KPMG LLP, the audit, tax and advisory firm. In the KPMG survey, which polled 553 financial executives from oil and gas companies in April 2007, twenty-five percent of the respondents said that at least 75 percent of government funding into energy should be directed at the renewable sources sector and a further 44 percent said that at least 50 percent of funding should be allocated in the same way. These feelings stem from the overwhelming majority, or 82 percent, citing declining oil reserves as a concern. 'These executives are deeply concerned about declining oil reserves, a situation they see as irreversible and worsening,' said Bill Kimble, National Line of Business Leader, Industrial Markets for KPMG LLP. 'They see renewable energy sources as a lifeline but our survey shows that the execs recognize they cannot count on them as a solution in the short-term. Consequently, oil and gas companies are sending a clear signal to the government that intervention is needed.' While oil and gas executives are keen to see renewable energy sources becoming a mass produced reality, 60 percent say that will not be possible by 2010. Of those that believe it will, 18 percent say ethanol is the most viable for mass production by then, 13 percent say biodiesel and only 3 percent say cellulosic ethanol. Sixty percent of the executives believe that the trend of declining oil reserves is irreversible. And, when asked about the impact of emerging markets, such as China, will have on declining oil reserves, almost 70 percent of the executives said that it would lead the situation to worsen.... KPMG will be discussing these survey results during its Fifth Annual Global Energy Conference, the event for financial executives in the oil and gas industry on May 22nd and 23rd at the Intercontinental Hotel in Houston."
60 percent of oil and gas execs believe trend of declining reserves is irreversible
KMPG Press Release, 11 May 2007

"The amount of water available in Northern Alberta isn't sufficient to accommodate both the needs of burgeoning oil sands development and preserve the Athabasca River, contends a study issued jointly yesterday by the University of Toronto and the University of Alberta. The study, written in part by Dr. David Schindler, a University of Alberta biologist considered Canada's top water expert, suggests that the choke point for the province's oil sands expansion may not be the huge carbon dioxide emissions arising from mining and processing the sticky, bitumen containing tar sands, as is widely assumed, but a lack of water.Oil sands plants typically use two to four barrels of water to extract a barrel of oil from the tar sands, a resource that has given the Northern Alberta region the world's largest petroleum reserves but made it a global centre of environmental controversy. The problem of water availability is expected to become acute in the decades ahead because climate change is likely to cause much more arid conditions, reducing stream flows on the Athabasca River, the source of the industry's water, to critically low levels during parts of each year.... In response to water worries, companies such as Syncrude Canada Ltd. have been trying to reduce the amounts used through such actions as increased water recycling. Syncrude bills itself as the most efficient water user in the oil sands, using only 2.28 tonnes of water in 2005 for every tonne of oil extracted."
Choke point for oil sands may be water shortage
Globe And Mail, 11 May 2007

"Oil production outside the OPEC cartel will keep rising until about 2015, while global output will continue to expand through 2025 at least, a top analyst at consultancy Wood Mackenzie said on Tuesday.... Wood Mackenzie also estimated that fuel produced from biofuels, gas-to-liquids, coal-to-liquids and shale oil would account for about 7 percent of capacity by 2025."
Non-OPEC oil output seen peaking by 2015: WoodMac
Reuters, 25 April 2007

"CEO Jeroen van der Veer is looking beyond 'easy oil' in readily accessible wells and is going after oil in tar sands, beneath deep waters, in the Arctic and other 'unconventionals,' which means weathering rough climates and locales."
Beyond British Petroleum
Newsweek, 16 April 2007

"China's fast-paced economic growth—averaging 9.1% per year in the last decade—can only be sustained by high energy consumption, an increasing amount of which will need to be imported. Given global competition for energy resources, China's energy policy is now focused on securing a steady supply in the medium to long term..... China has been a net oil importer since 1993, and energy demand is expected to continue increasing at a greater proportional rate than production. In 2005 China produced 3.6m barrels/day, only slightly up from 2.8m b/d in 1990. China consumed 6.9m b/d in 2005, representing a 100% increase in consumption in the last decade. This made China the world's second-largest consumer of petroleum products in 2005, just behind the US. The US Energy Information Administration estimates that China's consumption will increase to 15m b/d by 2030, whereas its output will lag behind at 4.2m b/d. The country's energy demand dictates that it will need to increase both its imports and its suppliers in the next ten years if it is to avoid shortages. At present, the bulk of China's oil imports come from the Middle East (40% in 2005 according to a UK energy company, BP), closely followed by Africa (23%) and Asia (21%). However, there are strategic risks associated with China's long-term reliance on these established trading partners. A key risk is international competition, particularly with regard to the Middle East. With fellow high-level oil importers such as the US already well established in the region, aggressive competition will mean that China cannot rely on the Middle East alone to make up its projected supply shortfall. In any case, China will be wary about becoming over-reliant on a single supplier, whether a specific country or a region. This is closely linked to the risk of reliance on politically unstable suppliers and routes of supply. Of China's top five oil suppliers in 2005, Saudi Arabia, Angola and Iran remain at risk either of internal political upheaval or terrorist attack. As a result, China is increasingly looking beyond its immediate sphere of influence...."
Growing energy nexus
Economist, 10 April 2007

"Flush with cash from record oil revenues, Middle East crude producers have spent billions on economic development and now find themselves short of another energy source needed for growth - gas. The Middle East holds around 40 per cent of the world's gas reserves, but produces only around 10 per cent of global supply. The gap points to the potential for a jump in future production that the US and consuming countries in Asia and Europe hope would mean higher exports. But regional demand growth of up to 10 per cent per year is eating into export potential. Widening supply deficits are forcing governments to emphasise meeting domestic needs. 'Demand growth in the region for natural gas is unprecedented anywhere else in the world,' said Rajnish Goswami, gas and power consultant for Wood Mac-kenzie. 'Governments are quite rightly prioritising the domestic sector before anything else.'... Politics, sanctions and construction delays have slowed Iran's gas development. 'Getting incremental gas supplies from Iran and Qatar will be very challenging,' Goswami said. BP estimates the gas supply deficit to Gulf countries could reach seven billion cubic feet per day by 2015. Subsidised domestic prices and a focus on oil mean the region has not developed its gas resources quickly enough to keep up with demand."
Gas crunch likely as Mideast races to meet local needs
Reuters, 7 April 2007

"The days of so-called 'easy oil' are over, making it harder to meet demand without complicated and expensive projects, the heads of two of Europe's largest oil companies said today. The International Energy Agency, an adviser to energy importing nations, estimates oil supply will have to rise 39 percent to 116 million barrels of oil a day by 2030 from about 86 million barrels a day now to meet world demand. Meeting such targets with conventional oil sources will be 'extremely difficult,' Christophe de Margerie, the chief executive officer of Total SA, Europe's third-largest oil company and its largest refiner, said at a conference in Paris today. New supply will be based on 'huge high-tech' projects. Jeroen van der Veer, the chief executive officer of Royal Dutch Shell Plc, Europe's largest oil company, said countries no longer seek Shell's help with conventional reserves, such as onshore oil or gas that's cheaper to develop than offshore fields.....Explorers are pushing further offshore as technology improves and fields onshore and in shallow water run dry."
Total, Shell Chief Executives Say `Easy Oil' Is Gone
Bloomberg, 5 April 2007

"In March 1971, a Mexican fisherman named Rudesindo Cantarell took a few geologists from state-run oil company Petroleos Mexicanos to this spot, where he had seen oil slicks. Mr. Cantarell didn't know it, but he had stumbled across one of the largest offshore oil fields ever found. A few decades and 12 billion barrels of oil later, the field that bears Mr. Cantarell's name is dying, and Pemex, as the state-owned company is known, is struggling to stave off the field's demise. From January 2006 though February 2007, Cantarell lost a staggering one-fifth of its production, with daily output falling to 1.6 million barrels from two million. The oil industry was stunned. Cantarell, which currently produces one of every 50 barrels of oil on the world market, is fading so fast analysts believe Mexico may become an oil importer in eight years. That would batter Mexico's economy, which depends on oil exports to fund 40% of its government spending. The continued deterioration of the world's second-biggest field by output would also put pressure on prices on the global oil market, where supplies are barely keeping up with growing demand as it is. And it would leave the U.S. even more dependent on Middle Eastern supplies -- and that much more vulnerable to political tumult in that region. The demise of Cantarell highlights a global issue: Nearly a quarter of the world's daily oil output of 85 million barrels is pumped from the biggest 20 fields, according to estimates from Wood Mackenzie, a Scotland-based oil consulting firm. And many of those fields, discovered decades ago, could soon follow in Cantarell's footsteps. It's widely believed that the world's biggest oil fields have already been found. In the decades leading up to the 1970s, the world discovered eight big fields that produced between 500,000 to one million barrels a day, according to Matthew Simmons, a veteran oil industry banker. During the 1970s and 1980s, only two were found. Since then, only one -- the Kashagan field in Kazakhstan -- has the potential to easily top the 500,000 barrel-a-day mark. Two decades ago, about a dozen fields produced more than a million barrels a day. Now there are only four, one of which is Cantarell. The future of two others, discovered more than 50 years ago, remains in question. Some analysts speculate Saudi Arabia's Ghawar, the biggest field by far, could begin a gradual decline within a decade or so. Another, Kuwait's Burgan, is showing signs of maturity. In November of 2005, Kuwait Oil Co. lowered its estimate of the field's sustainable production level to 1.7 million barrels a day from 1.9 million a day."
Mexico Tries to Save A Big, Fading Oil Field
Wall St Journal, 5 April 2007

"The world is consuming oil at a rate that will result in oil production peaking in 15 to 25 years, a group of geoscientists told the American Association of Petroleum Geologists' annual convention in Long Beach, Calif. When world oil production reaches the peak by 2020-30, the rate will be 90-100 million b/d, only 10-20% higher than it was in 2005. Depending on the level of world oil resources, which is highly uncertain, that peak is likely to last 20-30 years before production begins its ultimate decline. The estimates are released for the first time following an AAPG Hedberg Research Conference held in November 2006 in Colorado Springs.... Unconventional resources-tar sands and extra-heavy oil, oil shale, and oil from mature source rocks-provide a massive in-place resource. Each is known to have at least 3-4 trillion bbl. The problem with these unconventional resources is recoverability. Each faces a major challenge, whether poor quality oil (extra-heavy oil), poor quality reservoirs (oil from source rocks), or both (oil shale). Production of extra heavy oils and oil shale also requires substantial energy, enough so that oil shale production may be severely constrained by being mostly uneconomic due to a low net energy gain. The 75 Hedberg conference participants came from 18 countries on all six populated continents. "
World oil production to peak in 15-25 years, AAPG told
Oil And Gas Journal, 4 April 2007

"Royal Dutch Shell Plc pumped twice as much oil as it found last year, forcing the company to rely on traditionally lower-margin natural gas and oil sands to boost its reserves. Figures issued on Monday echoed a trend across the industry as resource holders increasingly shun the oil majors.... Shell added more reserves from its growing oil sands operation in Canada than of conventional crude."
Shell 2006 reserves show shift from oil to gas
Reuters, 2 April 2007

"Nuclear companies and those mining Canada's oil sands are poised to team up to separate crude from deep Earth and pump it to the surface. Reactors are being pushed as a more economical and environmentally friendly alternative to the natural gas now used to fuel oil-sands projects, but the stigma of nuclear energy -- and its ability to do the job -- remain an obstacle. The high price of crude makes oil sands attractive to develop, a process where hydrocarbons mixed with sand, water and clay over millions of years and under the Earth's pressure are extracted, separated, refined to a synthetic oil and sent to market. 'It's quite energy intensive,' Jeffrey Collins, director of Global Oil for Cambridge Energy Research Associates, told United Press International. 'There is still a strong gain positively in terms of the amount of energy you're able to get out of it versus the energy you use.' Canada is the world's seventh-largest oil producer at 3.1 million barrels per day and the No. 1 supplier for the United States. Most of Canada's production is from conventional crude, but 'the vast majority of Canada's reserves are actually in oil sands' in an area the size of Florida, Collins said. More than 1 million bpd of Canada's oil is from sands. That could triple in 10 years. But as sands production increases, so does its demand for energy, mostly supplied by natural gas. The Energy Information Administration, the data arm of the U.S. Energy Department, predicts demand for natural gas in North America alone will increase by 1.1 a year through 2030. Canada's appetite jumped 1.9 percent in 2003. Canada's reserves are the 17th-largest in the world, but the EIA predicts a net decrease in production through 2030.... The World Nuclear Association estimates natural gas is 60 percent of an oil-sands facility's operating costs. But the price of natural gas jumped 6 percent in the past week alone, to $7.56 per thousand cubic feet, down from the $8.51 average last year and well above the $2 levels of the 1980s and 1990s..... There are still a number of roadblocks to clear, at least before Canadian sands are powered by nuclear reactors. Canada's Alberta province, where nearly all its sands are located, has never had any nuclear power. It would likely need the general approval of the community, including a large indigenous population. The Canadian House of Commons' Committee on Natural Resources issued a report this month entitled, 'The Oil Sands: Toward Sustainable Development,' in which it put a hold on nuclear energy 'until the repercussions of this process are fully known and understood.' .... The report cited worries over the waste produced by nuclear plants and questions about nuclear energy's ability to deliver the needed steam. And the committee was uncomfortable not knowing whether the sands would need one or numerous large reactors to power operations, or an even greater number of smaller models. There are two types of oil-sands operations. The more shallow deposits are harvested in a strip-mining-style, where Earth is peeled back and massive trucks and shovels remove the wanted product. It's then super-heated with water or steam, and the molasses or tar-like bitumen is removed. 'Right now mining is the largest component, more than 60 percent of production of oil sands,' Collins said. 'More than 80 percent of global reserves' are too deep for mining 'the low-hanging fruit.' Two primary technologies -- called 'in situ' (Latin for 'in place') -- have been developed for deep extraction. Cyclic Steam Stimulation uses high-pressure steam delivered through pipes to heat up the heavy bitumen, which is brought to the surface. For Steam Assisted Gravity Drainage, a method gaining in popularity, Collins said, two parallel pipes are drilled vertically and then jut in a 90-degree angle. The top pipe injects steam, and the one below collects the bitumen and draws it to the surface. Both in situ and surface mining bitumen needs further intensive processing and upgrading so that it is capable of being refined or sent away in a pipeline. A number of nuclear companies, led by Energy Alberta, which has plans to bring two reactors online to power sands operations by 2017, are looking to provide the energy needed for such projects."
Analysis: Nuclear-powered oil sands
United Press International, 30 March 2007

"Alberta being the fourth largest producer of oil in the world is fairly significant, says John Clinkard, consulting economist with CanaData. But Clinkard expects that there will be some moderate checks to the oil sands boom as a number of factors may constrain and create temporary 'pull-backs' in the industry. The moderate checks may allow breathing room for the industry’s talks about skill shortages, says Clinkard. A major concern voiced by the industry is that the number of people entering the construction labour force is slowing and the industry’s mean age is high. 'Right now, they are scraping the bottom of the barrel in terms of getting enough people to assist in this activity and I don’t see that that’s going to change,' adds Clinkard."
Oil sands boom adds to worker shortage woes
Daily Commercial News, 2 April 2007

"President Felipe Calderon has sent federal troops to hot spots around the country to combat drug traffickers in recent months. But another group of scofflaws might prove tougher to bring to justice: Mexico's tax cheats. In the next few weeks, Calderon's administration will unveil a revenue-raising plan that probably will prove as divisive as it could be pivotal for Mexico's future....Mexico's tax crunch has been decades in the making. The world's 13th-largest economy raises tax revenue about as effectively as Sri Lanka and Kazakhstan as a percentage of its gross domestic product, World Bank data indicate..... The federal government collects most tax revenue, then redistributes it to the states. The top-down approach means citizens and local officials have no assurance that their taxes will stay in their communities to improve streets and schools. The biggest culprit is oil. Petroleum sales and related taxes have generated more than $335 billion in the past six years. That gusher of riches has removed the urgency for legislators to act. It's easier to squeeze more money out of Pemex than to enrage voters with tax increases or tougher enforcement. Oil revenue last year funded nearly 40 percent of public spending. Now production at the country's largest oil field, Cantarell in the Gulf of Mexico, is declining rapidly. With nothing on the horizon to replace it, Calderon knows that Pemex must be allowed to reinvest more of its earnings to fund exploration and development. Mexico has a little more than a decade's worth of proven reserves remaining, increasing pressure on Calderon to make headway on the nation's tax mess during his six-year term."
Declining oil pushes Mexico to rethink taxes
Los Angeles Times, 31 March 2007

"The U.S. government is in need of a strategy to minimize potentially dire economic consequences after worldwide oil production peaks and begins to decline, the investigative arm of Congress said Thursday. Though experts disagree about when daily oil output will reach its maximum level -- or whether they have done so already -- the Government Accountability Office said in a report that most studies have found oil production will reach a peak sometime between now and 2040. The report warns that, as the world's largest oil consumer, the U.S. is vulnerable to significant economic troubles, brought about by rising prices, if a peak arrives and no technology exists to replace petroleum-based transportation fuels.... 'The consequences of a peak and permanent decline in oil production could be even more prolonged and severe than those of past oil supply shocks,' the GAO report said. While the federal government has numerous efforts to forecast oil production and promote alternatives to oil, those efforts are spread across multiple agencies and are not focused explicitly on the 'peak oil' problem, the report said. 'There is no formal strategy for coordinating and prioritizing federal efforts dealing with peak oil issues,' the GAO said. In letters to the GAO, the Energy Department and Interior Department agreed with most aspects of the report."
Report: Gov't needs plan for oil peak
Associated Press, 29 March 2007

"As crude oil prices surge on rising political tensions with Iran, a new government report released Thursday said that the U.S. is unprepared to face an oil supply crisis and urged U.S. policymakers to develop a strategy in order to reduce potential risks related to an oil shock. The report from the U.S. Government Accountability Office concluded that the U.S. has no plans in place to address 'peak oil,' the future point in history of maximum oil production, which would be followed by irreversible declines in oil fields around the world. 'While the consequences of a peak would be felt globally, the United States, as the largest consumer of oil and one of the nations most heavily dependent on oil for transportation, may be particularly vulnerable,' the GAO report said. An expert told CNBC on Thursday that peak oil is the 'the single biggest issue to threaten sustainable society' in the United States. ''We are on the verge of actually replacing global warming by this term peak oil,' said Matthew Simmons, author of Twilight in the Desert: The Coming Oil Shock and the World Economy. 'We have demand roaring ahead and supply is faltering.'"
U.S. Unprepared For Oil Supply Crisis: Government Report
CNBC, 29 March 2007

"Our forecasts of the current balance from 2007-08 to 2011-12 are affected by one major change in the last year - the sharply lower levels of production and yet higher costs in the North Sea - which have this year reduced tax revenues from �13 billion to �8 billion and for each year into the future cut them by an average of �4 billion a year."
Gordon Brown's 2007 budget
Reuters, 21 March 2007

"The UK became a net importer of oil for most of 2006, according to the Oil Depletion Analysis Centre (ODAC) in Aberdeen. 'It is time for the UK government to let go of the idea that the UK will be a net oil exporter until 2010 and accept we are now dependent on imports,' ODAC said. Data published by the UK Department for Trade and Industry showed that the UK imported oil during every month in 2006 except for June.... Crude oil production in the UK in 2006 was an estimated 1.6 million b/d, while consumption was an estimated 1.7 million b/d."
ODAC: UK was net oil importer in 2006
Oil and Gas Journal, 13 March 2007

"Governor Richardson told oil and gas investors Wednesday in New York how he’d wean the United States off foreign sources of their product if elected president in 2008. The New Mexico Democrat says dependence on foreign oil is America’s Achilles heel. Richardson says he’d promote tax breaks for the construction of energy efficient buildings and offer tax credits for hybrid cars and public transportation. And Richardson says he’d create a system of tradable energy credits to encourage private investment in alternative energy technologies. Richardson has set a goal of reducing oil imports by 40 percent and replacing liquid fuels with biofuels by 2025. He’s also called for a 75 percent reduction in greenhouse gases by 2050."
Richardson outlines plan to end oil dependence
Associated Press, 14 March 2007

"High feed costs, created by the explosive growth of the fuel ethanol industry, will lower U.S. beef and broiler chicken output this year by a quarter billion lbs from earlier forecasts, the U.S. government said on Friday... The Agriculture Department said beef output would dip by 62 million lbs and chicken by 124 million lbs from last month's estimate, with total red meat and poultry production forecast for 90.359 billion lbs. Cattle, hog and poultry feeders say abrupt increases in feed costs -- predominantly corn -- are squeezing their operations....The ethanol industry is expected to use 2.15 billion bushels of the 2006 corn crop and 3.2 billion bushels of this year's crop."
Ethanol-driven feed costs cut U.S. meat output: USDA
Reuters, 11 March 2007

"The accelerating cost of producing oil and gas from new frontiers is hindering the development of vital reserves west of Shetland, one of the world’s top oil barons claims. Christophe de Margerie, the chief executive of Total, France’s largest company, has also questioned whether it is possible to raise global oil output from today’s 85 million barrels per day to 100 million barrels per day, given the cost and logistical challenge.... He said that the benchmark oil price for developments in difficult locations is no longer $30 per barrel but $50 per barrel, not far from the current oil price of just over $60. Mr de Margerie repeated his scepticism about International Energy Agency (IEA) predictions of oil output of 120 million barrels per day by 2030. 'There is no chance,' he said. Further warnings about the impact of rising costs on the oil and gas industry came last week from the Centre for Global Energy Studies (CGES), which revealed that nonOpec oil production last year rose by only 450,000 barrels per day, a fraction of the 1.5 million bpd predicted by forecasters. 'The oil industry is finding it harder and harder to expand upstream capacity,' the CGES writes in its Global Oil Report. 'Development costs are up sharply, essential equipment and skilled labour are in short supply and governments want a bigger share of the proceeds. As a result, projects take longer to complete and output is growing more slowly than predicted.'”
Growing costs ‘put Shetland oilfield plans in jeopardy’
London Times, 12 March 2007

"Iran has the potential to produce 4.2 million barrels of oil and 300 million cubic meters of natural gas per day, a report on Saturday quoted the deputy oil minister as saying. Gholamhossein Nozari, who is also the managing director of the National Iranian Oil Company (NIOC), stated that 35 to 40 million dollars has been invested in the oil and natural gas projects currently underway in the southern Iranian province of Fars, which will help turn the region into one of the nation’s energy hubs."
Iran capable of producing 4.2m barrels of oil, 300m cu. m. of gas per day: official
Mehr News Agency (Iran), 10 March 2007

"Petr�leos Mexicanos (Pemex) reduced by 60% their estimation of prospective resources in the waters of the Gulf of M�xico, in an area called Deep Coatzacoalcos, located between Campeche and Tabasco. Carlos Morales Gil, general director of Pemex Exploraci�n y Producci�n (PEP) stated that the latest studies done in this oil province, in depths between 930 and 980 meters (2976 feet and 3136 feet), show that in this area of 10 thousand square kilometers (6 thousand square miles) there are prospective resources of 4 billion barrels of oil equivalent. This new information settles up the calculations made in the middle of the last year, when then president of the republic, Vicente Fox, overestimated the amount of the prospective resources in this area, when he calculated them as 10 billion barrels of oil equivalent, based in Pemex’s prospections."
Pemex reduces its estimation of prospective resources in the Gulf by 60%
La Jornada, 5 March 2007

".... yesterday, a National Energy Board official said Alberta's oilsands projects are projected to account for 90 per cent of Canada's total crude oil output by 2030. 'Total oil output will increase to 4.6 million barrels per day and of this nearly 4.14 million will be from the oilsands,' said John McCarthy, who spoke at a natural gas conference in Calgary."
Oil extraction costs rise 55 per cent
Vancouver Sun, 7 March 2007

"Capital costs per peak flowing barrel of Canada's oil sands are up 55 percent, squeezing returns on investments, a report released Tuesday said. Edinburgh-Scotland-based Wood Mackenzie, in its report, 'The Cost of Playing in the Oil Sands,' says despite high land prices, the cost of acquiring acreage is small compared to the investment required for commercial development. Last year, many of the top players in the oil sands sector either announced changes to their plans or reported cost increase, leading to 'an average rise in capex per peak flowing barrel over the year of 32 percent for integrated mining projects and 26 percent for in-situ developments. Since 2005, overall costs per peak flowing barrel have increased by around 55,' Wood Mackenzie said in a statement. 'Marginal economics have always been a concern for companies operating in the oil sands, breakeven prices are high and rates of return relatively low in comparison with conventional projects, particularly for mining projects,' said Conor Bint, Upstream Research Analyst - Canada and Alaska for Wood Mackenzie. The firm said mining projects had an average breakeven price of $28/bbl and IRR of 16 percent; rates of return were more favorable at the less capital-intensive in-situ projects, averaging around 22 percent, Wood Mackenzie said. The report attributed much of the increase in costs to labor shortages and an increase in material costs."
Report: Oil sands costs up 55 percent
United Press International, 6 March 2007

"Greenhouse-gas emissions from Alberta's oil sands would be allowed to rise dramatically under a draft version of the government's long-anticipated climate-change plan obtained by The Globe and Mail.....The leaked government documents, marked secret and dated Dec. 20, 2006, show that the government was still pursuing a plan at that time based on intensity targets until at least 2020....Rather than intensity-based targets, environmentalists want rules for industry to force their total levels of emissions to go down. Preferably, they would prefer the rules to use the standard of 1990 emission levels, which are used by all Kyoto signatories. Canada, for instance, agreed to reduce its emissions levels to 6 per cent below 1990 levels, but emissions are more than 30 per cent above that target.Instead of using the 1990 baseline, the Conservative plan in the documents uses 2000 as its base for intensity targets. Separately, it also used 2003, when it said last fall that its long-term target is to reduce emissions between 45 and 65 per cent from 2003 levels by 2050.....The Pembina Institute has been tracking project announcements by oil-sands companies and said the documents underestimate the future growth of that sector. The government documents set a target for the oil sands of reducing the intensity of emissions by 40 per cent by 2020. If all oil sands projects go ahead, Mr. Bramley said, industry could meet that target while allowing total greenhouse-gas emissions to rise 248 per cent higher than 2000 emission levels. The documents also appear to acknowledge this, he said."
Climate draft allows spike in oil-sands emissions
Globe and Mail, 26 February 2007

"In 2007, (oil) demand should grow 1.7mn bpd with the key drivers being China, commodity producers and the US, the Institute of International Finance (IIF) said in a presentation, ‘Outlook for Global Oil Markets’, at the 10th annual meeting of Middle Eastern and North African Bank Chief Executives in Doha yesterday....Non-Opec supply is expected to grow only 1mn bpd this year with supply growth to come from the Central Asian region (500,000 bpd), Africa (300,000 bpd), Latin America (170,000 bpd) and OECD flat with Canada increase offsetting Mexico decline, it said.... The total spare production capacity in the market dropped to 1.67mn bpd during 2004-06 from 4.7mn bpd in 2002 due to accelerated demand, languished non-Opec supply and Opec’s loss of capacity. Expecting Opec spare capacity to remain at 2.4mn bpd this year, it said Opec production capacity had stagnated around 30.5mn bpd while spare capacity had fallen precipitously since 1980s. Expressing doubt over Opec’s long term capacity growth, it said: 'the commitment and ability by the lowest price producers to increase output is dubious.'”
Oil prices ‘to remain over $65 this year’
Gulf Times, 24 February 2007

"Troubles buffeting the U.S. mortgage market could get worse as resurgent crude oil prices squeeze the finances of already hard-pressed borrowers, analysts say, and that could spell more trouble for Wall Street. The fallout from the subprime mortgage lending industry, which lends to riskier borrowers with spotty credit histories, could even trigger a long-anticipated correction in the U.S. stock market, they said. 'The subprime borrower is the one who would be hurt the most if gas and heating oil prices went up further,' said Jim Awad, chairman of Awad Asset Management in New York. 'The thinking is that if you are going to have a spike in energy prices here, it would hurt the poor consumer who is already at risk.' ........ On Friday, investors pummeled shares of subprime lenders further, with shares of New Century Financial Corp. NEW.N and NovaStar Financial Inc. NFI.N extending declines seen earlier in the week. The sell-off, which came as U.S. crude for April delivery CLc1 rose above $61 a barrel, a 2007 high, sent the S&P Financial index .GSPF to its biggest slide in a month. ....... Until recently oil prices had been declining, creating a cushion for hard-pressed homeowners. "
Subprime woes seen worsening if oil hits borrowers
Reuters, 23 February 2007

"Unexpected delays have pushed back Shell’s time line for possibly beginning commercial oil shale development in western Colorado... Shell representatives provided an update on its oil shale efforts during an open house in Rifle Thursday. Company spokesperson Jill Davis said Shell previously had hoped to switch from research and development to a commercial phase by the end of this decade. Now it’s shooting for early in the next decade, assuming its testing continues to produce positive results. 'Things are still going very well but we need more time,' Davis said. She said the process of obtaining permits and federal leasing has been taking longer than the company had expected."
Shell pushes back time line for any oil shale development
Post Independent, 22 February 2007

"For decades, doomsayers have wailed that we are running out of oil, and economists have replied smugly that price rises would always bring forth extra supply. A new report from the consultancy, Wood Mackenzie, suggests that both may be right and that will lead to some difficult choices. Wood Mackenzie’s report identifies 3,600bn barrels of unconventional reserves such as oil shales and sands.... The good news ends there, however. The report makes it clear that these reserves might be needed much sooner than many industry experts had expected. Demand continues to blossom and, while new oil is always being discovered, many of today’s largest fields are in decline. As soon as 2020, conventional production could reach a plateau, leaving unconventional reserves to take up the slack. If the report is correct – a big if – then it is worrying. Unconventional oil is expensive to exploit. The technology is unproven for all but a few early projects, and engineers are scarce. Unconventional oil production is also an environmentally damaging mining operation that uses a lot of energy and water to produce low-quality crudes.... It would be handy to have proven techniques for extracting oil and gas from unconventional sources in the US and Canada. Society as a whole would benefit from the increased security of supply but subsidising unconventional production promises high emissions and plenty of pork with little assurance of success... Governments should focus more on basic technology and here the scarcity of qualified engineers is as worrying as the scarcity of oil. The shift to unconventional resources also amplifies the case for pollution taxes or a credible system of tradable permits... The next few decades will see a tug-of-war between ever better energy production technology and ever more elusive energy sources."
Unconventional oil: Think of the volumes, not the quality
Financial Times, 21 February 2007

"Within five years, solar power will be cheap enough to compete with carbon-generated electricity, even in Britain, Scandinavia or upper Siberia. In a decade, the cost may have fallen so dramatically that solar cells could undercut oil, gas, coal and nuclear power by up to half. Technology is leaping ahead of a stale political debate about fossil fuels. Anil Sethi, the chief executive of the Swiss start-up company Flisom, says he looks forward to the day - not so far off - when entire cities in America and Europe generate their heating, lighting and air-conditioning needs from solar films on buildings with enough left over to feed a surplus back into the grid. The secret? Mr Sethi lovingly cradles a piece of dark polymer foil, as thin a sheet of paper. It is 200 times lighter than the normal glass-based solar materials, which require expensive substrates and roof support. Indeed, it is so light it can be stuck to the sides of buildings. Rather than being manufactured laboriously piece by piece, it can be mass-produced in cheap rolls like packaging - in any colour. Rather than being manufactured laboriously piece by piece, it can be mass-produced in cheap rolls like packaging - in any colour. The 'tipping point' will arrive when the capital cost of solar power falls below $1 (51p) per watt, roughly the cost of carbon power. We are not there yet. The best options today vary from $3 to $4 per watt - down from $100 in the late 1970s. Mr Sethi believes his product will cut the cost to 80 cents per watt within five years, and 50 cents in a decade. It is based on a CIGS (CuInGaSe2) semiconductor compound that absorbs light by freeing electrons. This is then embedded on the polymer base. It will be ready commercially in late 2009. 'It'll even work on a cold, grey, cloudy day in England, which still produces 25pc to 30pc of the optimal light level. That is enough, if you cover half the roof,' he said. 'We don't need subsidies, we just need governments to get out of the way and do no harm. They've spent $170bn subsidising nuclear power over the last thirty years,' he said. His ultra-light technology, based on a copper indium compound, can power mobile phones and laptop computers with a sliver of foil.... The sector is poised to outstrip wind power. It is a remarkable boom for a technology long dismissed by experts as hopelessly unviable.... Mike Splinter, chief executive of the US semiconductor group Applied Materials, told me his company is two years away from a solar product that reaches the magic level of $1 a watt. Cell conversion efficiency and economies of scale are galloping ahead so fast that the cost will be down to 70 US cents by 2010, with a target of 30 or 40 cents in a decade.... 'The beauty of this is that you can use it in rural areas of India without having to lay down power lines or truck in fuel.' Villages across Asia and Africa that have never seen electricity may soon leapfrog directly into the solar age, replicating the jump to mobile phones seen in countries that never had a network of fixed lines. As a by-product, India's rural poor will stop blanketing the subcontinent with soot from tens of millions of open stoves."
Monday view: Cheap solar power poised to undercut oil and gas by half
Daily Telegraph, 18 February 2007

"All the world’s extra oil supply is likely to come from expensive and environmentally damaging unconventional sources within 15 years, according to a detailed study. This will mean increasing reliance on hard-to-develop sources of energy such as the Canadian oil sands and Venezuela’s Orinoco tar belt. A report from Wood Mackenzie, the Edinburgh-based consultancy, calculates that the world holds 3,600bn barrels of unconventional oil and gas that need a lot of energy to extract. So far only 8 per cent of that has begun to be developed, because the world has relied on easier sources of oil and gas. Only 15 per cent of the 3,600bn is heavy and extra-heavy oil, with the rest being even more challenging. The study makes clear the shift could come sooner than many people in the industry had expected, even though some major conventional oil fields will still be increasing their production in 2020. Those increases will not be enough to offset the decline at other fields."
Study sees harmful hunt for extra oil
Financial Times, 18 February 2007

"China's dependency on imported oil rose by 47 percent of its annual demand last year, an increase of 4.1 percentage points from the previous year, sources with the Ministry of Commerce said yesterday.... Industry observers forecast that in 2007, China's crude oil output will grow less than 2 percent, while demand for both crude and oil products will rise by about 6 percent."
China's oil dependency to rise
China Daily, 14 February 2007

"Contrary to widely-held beliefs, if current trends continue, Russia will have a severe natural gas shortfall by 2010. This prediction is astonishing given that Russia has more gas reserves than any other country, and one of the largest reserves-to-production ratios. The reason for the looming gas shortfall is simple. Over the past several years, Gazprom, Russia’s state-owned natural gas monopoly, has not invested sufficiently, and lacks the technology to develop new gas fields to replace its rapidly depleting ones. From a Western point of view, the solution is simple: the Russian government should terminate Gazprom’s natural gas monopoly, and involve foreign oil companies and independent Russian ones in natural gas exploration, production, and transportation. However, it has no intention of doing so – at least not in the near future. And in typical fashion, Gazprom announced recently that it will not share the development of its huge Shtokman gas fields with outside companies..... Through Gazprom, the Russian government subsidizes its inefficient domestic industries with low-priced natural gas. Gazprom sells most of its gas to domestic customers at a considerable discount.... Gazprom is losing large amounts of money on domestic sales, and must rely on export revenues for the difference. Gazprom’s major challenge is the aging of all its major producing gas fields. Production from these fields is declining and studies project steep declines in Russia’s overall natural gas output between 2008 and 2020. According to Russia’s own projections, which ET published in December 2006, Russia will face a gas shortfall of about 100 billion cubic meters by 2010. Considering that Russia owns the largest gas reserves in the world, and one of the largest reserves-to-production ratios (81.5, compared to Algeria’s 55.4 and Canada’s 8.8, for example), this fact should be worrisome for energy officials from Beijing to Bonn.... Gazprom, often referred to as a 'state within a state,' holds about one-third of the world’s natural gas reserves and produces about 80 percent of Russia’s natural gas. The remaining percentage comes from independent producers.... Despite the country’s huge reserves, natural gas production has remained essentially flat over the past several years, with a mild production increase (1.3 percent) forecast for 2008. In contrast, oil production has flourished, especially during the Yukos years. The immediate future of natural gas production in Russia does not allow for much optimism. The overall production decline forecast for Gazprom is quite steep.... the problem of Russia’s looming gas shortage can only be solved by optimizing existing fields and through the rapid development and production of major fields such as Yamal, Shtokman, and Sakhalin. Obviously, implementing these solutions will require a substantial investment that Gazprom is unable to raise. Making matters worse, the state-owned company indirectly contributes to a continued production decrease by precipitating further government regulations and difficulties for independent producers.... The only real solution to Russia’s looming financial deficit is foreign investment in Gazprom, but this would strike at the heart of its monopoly, and the Putin government does not want that...."
Russia: A Critical Evaluation of its Natural Gas Resources
Energy Tribune, 13 February 2007

"Oil and gas production in the North Sea is now expected to be about 10 per cent lower over the next few years than previously thought, according to the leading survey of the state of the industry. The faster than expected decline in production is bad news for Britain’s energy security, increasing the country’s dependence on imported oil and gas, and also for the exchequer. The latest annual survey from the UK Offshore Operators’ Association, the trade body which gives the most authoritative assessment of the health of the North Sea, also shows a steep increase in costs and an expected decline in investment over the next couple of years..... old wells that are running dry and new wells that are generally very small cast a shadow over the outlook for the North Sea. Last year’s production of oil and gas was down 9 per cent at 2.9m boe a day, according to the association. That is already a steep fall from the peak in 1999 of 4.5m boe/d in 1999, and the lowest level since 1992. By 2010 production is expected to be down to just 2.6m boe/d. The main reason, ominously, is described as 'poor reservoir performance': in other words, wells not yielding as much oil and gas as had been hoped. But also an increasing amount of resources has been diverted to maintenance on the ageing infrastructure of the North Sea, some of which dates back to the first oil rush of the 1970s."
Fears for North Sea output grow
Financial Times, 13 February 2007

"The costs of big new oil and gas production projects have surged more than 53 percent in the past two years and there are no signs of a slowdown, according to a new oil and gas production project index launched on Monday. The index, developed by energy consultancy Cambridge Energy Research Associates (CERA), tracks the costs of a range of land-based and offshore upstream oil and gas projects around the world.... Deeper water projects have seen the biggest cost increases, according to the index data, rising 15 percent in the most recent six months..... Ward said CERA had characterized the sharp increase as a 'double bubble', referring to a sudden rise in costs, but he saw no sign of it bursting soon. He said the first bubble was the high oil and gas prices from 2003 onwards that persuaded oil and gas companies and governments to 'green-light' new oil and gas projects. The other bubble was several years of strong growth in the world economy, led by Asia and in particular China....Daniel Yergin, CERA chairman, said at the beginning of this decade companies used $20 a barrel as the price against which they tested new projects, now they used $40 as the floor for oil prices. 'Our short-hand phrase is 40 is the new 20,' he said.... CERA's analysis showed that while oil prices remain above $55 a barrel the oil and gas industry will continue to invest in new projects, but if prices slip below $50 some expansion projects were likely to be canceled or delayed."
New oil index points to rise in oil project costs
Reuters, 12 February 2007

"On March 27, 2003, Paul Wolfowitz, then deputy secretary of defense, predicted that Iraq's oil revenue would 'finance' its reconstruction and do so 'relatively soon.'....According to State Department figures, production has been stagnant at 2.1 million barrels per day, or 400,000 barrels per day below the immediate prewar peak (which was matched for a few months in 2004)."
Oil's Not Well in Iraq
The Weekly Standard, 10 February 2007

"Norway dropped to fifth place among the world's crude oil exporters last year as the nation's North Sea production declined, the Norwegian energy ministry said. The United Arab Emirates replaced Norway as the world's third-largest exporter after Saudi Arabia and Russia, Sissel Edvardsen, a spokeswoman for the ministry, said today in an interview. Iran currently holds fourth place, she said.... Oil output in Norway totaled 136.6 million standard cubic meters last year, or about 2.35 million barrels a day, according to figures published by the country's Petroleum Directorate yesterday. Almost all the oil is exported. By comparison, Saudi Arabia pumped an average 9.24 million barrels a day of crude oil in 2006, according to Bloomberg estimates. Iran produced 3.86 million barrels a day and the United Arab Emirates pumped 2.56 million barrels a day, the estimates showed. Crude oil output in Russia last year averaged 9.6 million barrels a day, Russia's Energy and Industry Ministry said last month....Norway's oil output this year will drop to an estimated 129 million standard cubic meters of oil equivalent, or 2.2 million barrels a day, the petroleum directorate said in January."
Norway Falls to Fifth Place Among World Oil Exporters
Bloomberg, 8 February 2007

"Mexican state-run oil monopoly Pemex confirmed a gloomier forecast on Wednesday for fast-declining oil output at its aging Cantarell field, but said from now on it could keep total crude production steady. Chief Executive Jesus Reyes Heroles said the company's official production estimate for Cantarell was for an average of 1.526 million barrels per day during 2007, down 15 percent from an average 1.788 million bpd last year. The figure is in line with recent industry talk but bleaker than Pemex's outlook six months ago when it forecast Cantarell's output at 1.683 million bpd for 2007 and 1.430 million for 2008. Reyes Heroles said that with an exploration and production budget of $15 billion a year, Pemex could keep total crude oil production steady between 3.0 million and 3.1 million bpd -- also a much less rosy forecast than Pemex was making last year.... Pemex's darkening outlook reflects worldwide concern over oil production as old gushers dry up and companies are forced to invest more in exploring harder-to-reach deposits."
Mexico's top oil field declining fast - Pemex
Reuters, 7 February 2007

"... control of the energy industry is central to Putin’s power. The re-nationalization campaign that started in 2005 with the destruction of Yukos continued and matured in 2006 with Rosneft’s IPO... Polls show that some 60 percent of the public approves of Putin’s energy power plays.... The tripling of gas prices was portrayed in the Russian media as a political threat to Kremlin-unfriendly Ukrainian president Viktor Yushchenko. But that political threat theory proved incorrect after Belarus, run by Kremlin darling Aleksandr Lukashenko, was also told to accept a tripling of gas prices..... Armenia accepted a supply contract for 25 years at double the previous price, with a potential price change in 2009. All these events destroyed the Gazprom-Kremlin conspiracy theory that was seen as punishing enemies and rewarding friends. All these countries have been targets for increasing Gazprom’s revenues. To help Gazprom even further, Russia has been receiving a fairly high discount on gas from Turkmenistan.... Without this gas Gazprom would be unable to satisfy the overall demand, both domestic and foreign..... So, is there enough gas in Russia to meet the demand over the next few years? The short answer is no, particularly if one accounts for the growth in domestic demand and the amount of pledged exports. Russia’s own gas production can no longer satisfy the existing requirements of domestic and foreign markets. Gazprom is strengthening its positions in Turkmenistan, Uzbekistan, and Kazakhstan with constantly increasing gas production, to feed the former Soviet republics as well as to satisfy domestic demand. A gas consumption forecast approved by Gazprom shows that through 2008, the difference between the volume of gas produced by the company and that used in domestic and foreign markets will be augmented with imports from former Soviet republics. The most likely supplier, of course, is Turkmenistan, thanks to the existing gas pipeline network.... However, those pipes won’t supply enough to stem the looming gas shortage. According to calculations by the Institute of the Problems of Natural Monopolies (IPEM), Russia’s annual gas deficit may reach 120 billion cubic meters by 2010, and 343 billion cubic meters by 2020. (Other studies put the shortfall at 100 billion cubic meters by 2010.)"
Russia: The Energy State of the Nation
Energy Tribune, 6 February 2007

"Global oil demand growth is seen rising 2% annually through 2011, the International Energy Agency said Tuesday, in a forecast that is more optimistic about the rate of future energy consumption compared with previous five-year periods, because of rapid growth in Asia. World oil consumption growth is expected to rise on average by 1.8 million barrels a day over the five-year period, from 84.5 million barrels a day in 2006 to 93.3 million barrels a day in 2011, the Paris-based IEA forecast in its medium-term report for 2006-2011. The 2% annually growth rate in consumption compares with growth of 1.8% in 2001-2006, and 1.4% in the 1996-2001 period.... oil producing nations and international oil companies need to continue to sink money into new capacity over the next several years. The IEA said Chinese oil consumption growth is expected to rise annually by 5.7%, more three times the oil demand growth pace in the U.S., while Middle East countries as a whole will use oil at an average annual rate of 4.9%."
IEA: 2006-2011 Global Oil Demand Growth Seen Rising 2% a Year
Dow Jones Newswires, 6 February 2007

"Daily output at Mexico's biggest oil field tumbled by half a million barrels last year, according to figures released Friday by the Mexican government. The ongoing decline at the Cantarell field could pressure prices on the global oil market, complicate U.S. efforts to diversify its oil imports away from the Middle East, and threaten Mexico's financial stability. The virtual collapse at Cantarell -- the world's second-biggest oil field in terms of output at the start of last year -- is unfolding much faster than projections from Mexico's state-run oil giant Petroleos Mexicanos, or Pemex. Cantarell's daily output fell to 1.5 million barrels in December compared to 1.99 million barrels in January, according to figures from the Mexican Energy Ministry. Mexico made up for some of the field's decline. Mexico's overall oil output fell to just below three million barrels a day in December, down from almost 3.4 million barrels at the start of the year. It marked Mexico's lowest rate of oil output since 2000. Mexico's troubles at Cantarell mirror the larger problems in the global oil market. Many of the world's biggest fields are old and face decline, which can be sharp and sudden. Like other big producers, Mexico is struggling to make up the difference because new big fields are in harder-to-reach places like the deep waters of the Gulf of Mexico."
Mexico's Oil Output Cools
Dow Jones Newswires, 30 January 2007

"Mexico is as addicted to oil as heroin addicts are to their next fix: the country depends on oil for a large proportion of its energy needs, consumes it at an unsustainable rate and goes into debt to obtain it. Unless it changes its behaviour or finds a therapy that works, the prognosis is that it will experience a serious crisis. The problem is enormous, analysts told IPS. Mexico produces 3.3 million barrels per day (bpd) of crude, making it the sixth world producer; it exports 1.8 million bpd, and owns one of the 10 largest oil companies, the state monopoly Petr�leos Mexicanos (PEMEX) -- but it is teetering on the edge of an abyss, they said.
Local oil reserves are expected to last only nine years and eight months at current rates of production, according to precise calculations by experts, whereas in 2000 they were forecast to last 20 years and seven months. Besides, PEMEX is bankrupt. PEMEX has debts greater than its total assets, is undertaking very little exploration, its extraction costs are rising steadily, and most of its revenues go straight into the state coffers to finance 36.1 percent of the national budget, twice the proportion that it contributed 20 years ago."
OIL-MEXICO: Severe Withdrawal Symptoms Ahead
Inter Press Service, 25 January 2007

"In China, China Shenhua Energy Co (CSEC) is setting the pace and looks like becoming the world leader in coal-to-liquids (CTL).... CSEC subsidiary Shendong is currently developing the first commercial project in Inner Mongolia. Project construction was 50% complete at the beginning of 2007, with the coal liquefaction reactors (each weighing 2,250 t) successfully installed. Full production is expected by the end of this year, some 20,000 barrels per day of oil from coal. However, the plans go far beyond this one plant. CSEC plans to operate eight liquefaction plants by 2020. Together they will yield in excess of 30 million tons a year of CTL oil, which is estimated to be sufficient to replace over 10% of China’s projected oil imports. These CTL plans are not only fascinating in their sheer size; they also involve very interesting technology. Up to now, all the world’s CTL has involved the Fischer-Tropsch (FT) process, which requires coal to be turned into synthetic gas, and then to be liquefied. CSEC is using a process developed by Friedrich Bergius, a decade before the FT process, which takes the coal directly to liquids. It is certainly not unproven technology as it was well used in wartime Germany. The China Coal Research Institute in Beijing estimates that the Bergius process yields significantly more fuel from each tonne of coal. It expects the process to capture more than 55% of the coal’s energy, compared to just 45% for FT."
Biggest Chinese coal mining company plans huge coal to liquids programme
Mineweb, 24 January 2007

"The Bush administration wants Canada to bypass environmental rules to quintuple its export of oil sand crude to the United States. The two sides discussed the move during a January 2006 meeting in Houston, according to a transcript recently obtained and released by Radio-Canada, the Canadian Broadcasting Co.'s French network. Canada's natural resources agency and the U.S. Energy Department organized the meeting of government officials and oil company executives from both countries. Canada, the No. 1 oil exporter to the United States already, was urged to increase its production of crude from oil sands from 1 million barrels a day to 5 million barrels a day. Oil sands are deep geological sands mixed with oil that is separated at high temperatures. But the process is energy intensive and is Canada's largest emitter of new greenhouse gases."
U.S. urged Canada to increase oil sands
United Press International, 19 January 2007

"Kazakhstan's new prime minister criticized foreign oil companies Thursday and ordered the government to tighten control over their activities in the energy-rich Central Asian nation, the government said....Last year, Kazakhstan downgraded its long-term oil output forecast from 3 million to 2.6 million barrels a day by 2015 because of delays with development of Caspian Sea fields. The start of production at the giant Kashagan oil field is not expected before 2009-2010 because of technological difficulties. The international consortium let by Italy's Eni SpA had originally planned to start production in 2005. The Kashagan field in northern Caspian Sea, the world's last biggest oil discovery in the past 30 years, is expected to play a crucial role in filling a new pipeline completed in 2005 and designed to carry Kazakh oil to energy-hungry China.... In the past few years, Kazakhstan has been pursuing a policy to increase state assets in its vast energy sector that is currently dominated by Western investors."
Kazakh leader orders control of oil
Business Week, 18 January 2007

"The progressive decline in Mexico�s capacity to produce oil is rapidly becoming more worrisome than the slump in global crude prices. According to estimates by the state oil company, Pemex, petroleum exports will decline dramatically during the Calder�n administration. Pemex is anticipating a 13 percent drop in its crude exports over the next six years as Mexico�s proven reserves continue shrinking. Analysts contacted by EL UNIVERSAL agree that Pemex�s inability to increase production is due to waning reserves - particularly the Cantarell field in Campeche Bay which is the source of roughly 60 percent of the nation�s proven reserves - and incapacity to access potential deep-water wells. The first symptoms of a genuine oil crisis are becoming more and more evident. Documents acquired by EL UNIVERSAL indicate Pemex will be forced to cut back on exports to the United States. The reduction could reach 150,000 barrels per day in the next four years. In the final two years of the Calder�n administration, the reduction could reach 500,000 barrels per day. Currently, around 1.5 million barrels of oil go to the United States daily.... According to Ra�l Mu�oz Leos, a former Pemex director, the primary problem lies in the rapid decline of Cantarell reserves and the failure to develop other fields. Mu�oz said production levels rose steadily from 2002 to 2004, encouraging company directors to predict a continuation of this trend. 'We established a production goal of 4 million barrels a day by 2006, but by mid-2005 production levels began to decline,' he said. Although Pemex�s exploration budget was boosted to US$4 billion last year, the investment has yet to bear fruit. 'Since this sizeable investment has brought little in return, it might be time for us to learn from the experience of other international producers and redouble our exploration efforts,' he said. 'It is impossible to ignore the fact that our reserves are rapidly shrinking.' The latest official projection shows Pemex will be able to produce only 3.3 million barrels per day over the next 10 years."
Pemex predicts production drop
El Universal, 17 January 2007

"Chevron Corp. and Royal Dutch Shell Plc are delaying construction projects from Australia to Nigeria, threatening to drive natural gas prices higher for years to come. None of the world's biggest energy companies approved developments last year to increase production of liquefied natural gas, which helps heat homes and run power plants from Tokyo to Boston. The main reason is the cost to build LNG plants has tripled in six years, according to Bechtel Group Inc., the biggest U.S. contractor. Natural gas prices are three times higher than during the 1990s and consumption of the fuel will outpace the 1.6 percent annual gain in energy demand for the next 25 years, according to the International Energy Agency. Gas is also becoming more popular because it emits 29 percent less carbon dioxide than oil and 45 percent less than coal burned in power stations. 'Costs are going up and they're going up far faster than anybody expected,' said Andy Flower, a U.K.-based consultant to the LNG industry and a former BP Plc executive. He forecasts that the world LNG shortage will last until at least 2011.... Two of the newest and biggest LNG projects have been over budget and late. Shell's Sakhalin-2 LNG in Russia has doubled in cost to more than $20 billion. Stavenger, Norway-based Statoil ASA's Snohvit LNG plant will cost $9.5 billion, almost 50 percent more than first anticipated in 2002. Building LNG plants now takes four years, rather than three, because contractors are stretched, said Flower, the consultant."
Chevron, Shell Delay LNG Projects, Sending Gas Higher
Bloomberg, 16 January 2007

"China imported 145 mln tons of crude oil in 2006, up 14.5 pct from 10.82 mln in 2005, the General Administration of China Customs said in a statement published on its website."
China's 2006 crude oil imports 145 mln tons, up 14.5 pct - customs
AFX News, 11 January 2007

"Alberta's oil sands will become the most important source of new oil in the world by 2010 as conventional crude dries up, CIBC World Markets says in its latest monthly report.... He added that conventional oil production around the world apparently peaked in 2004. Rubin found that total oil supplies around the world grew by less than one million barrels a day last year. None of that growth came from outside the OPEC sphere. ... Rubin looked at 164 upcoming oil fields in his study and found that new oil is, in fact, being discovered and it is coming on stream. But more than half simply balances declining production from existing fields in the North Sea and Kuwait's Burgan region. Rubin does expect a net gain in oil production in coming years, but it will be small and getting smaller.
Rubin expects 3.6 million barrels of new oil to come on stream in 2006, but 2.2 million barrels will go to replace declining reserves elsewhere, leaving just 1.4 million barrels of new oil. He expects 1.5 million barrels of new oil in 2006 and 2007, but less than a million barrels a day in 2008. Energy companies are finding new oil, but most of it will come from non-conventional sources. Ocean oil rigs are the primary source of new oil today, with Alberta's oil sands tomorrow, with expansion projects rivaling those of Saudi Arabia. Suncor Energy Inc. and its predecessor, Great Canadian Oil Sands, have been developing the oil sands near Fort McMurray in northern Alberta since 1963. But the project was hobbled by the difficulties and expense of extracting crude oil from what is essentially a oily sand."
Alberta oil sands to star now we're post-peak: CIBC World Markets
CBC News, 11 January 2007

"Despite controlling the world's largest gas reserves, Russia's state-owned monopoly Gazprom is not producing enough for an economy growing at 6% a year. Gazprom's three largest fields, which account for three-quarters of its output, are in decline. This domestic shortage means that Gazprom is unable to increase supply to Europe, at least in the short term, unless it can buy gas at below-market rates from its Eastern European and Central Asian neighbours and in turn sell it to its European customers at market prices. At the same time, Russia wants to cater to other markets, notably along its eastern frontier. The problem is not a lack of reserves, but Gazprom's investment strategy. In recent years, the company has spent vigorously on everything but developing its reserves.... with investment in Gazprom's core activity - production - steadily declining, a crisis is looming, one that requires the stewardship and steady hand of the EU. Gazprom's ambitions for gaining control of pipeline and energy transport infrastructure must be slowed, which requires allowing independent producers to prosper.... Europe's leaders should engage in frank discussions about where European and Russian interests converge or differ, and these discussions should include regional neighbours that are both producer and transit nations, like my own country, Ukraine."
Yuliya Tymoshenko, former Prime Minister of Ukraine and leader of the opposition
Steady as they go
Guardian, 10 January 2007

"Iran has ensnared itself in a petroleum crisis that could drive its oil exports to zero by 2015. While Iran has the third- largest oil reserves in the world, its exports may be shrinking by 10 to 12 percent per year. How can this be happening? Heavy industry infrastructure must be maintained to remain productive. This is especially so for oil, because each oil well's output declines slightly every year. If new wells are not drilled to offset natural decline, production will fall. This is what is happening in Iran, which has failed to reinvest in new production.... Another threat to exports is the growth in domestic demand. Iranian oil demand is not just growing, it's exploding, driven by a subsidized gasoline price of about 9 cents a liter. This has created a 6 percent growth in demand, the highest in the world. So Iran burns its candle at both ends, producing less and less while consuming more and more. Absent some change in Iranian policy, a rapid decline in exports seems likely."
Iran actually is short of oil
International Herald Tribune, 8 January 2007

"An energy crunch that chokes fuel supplies, dims the lights at homes and workplaces, and ravages Western economies may no longer be the stuff of 1970s history books. It could be a vision of the near future.The 1970s oil crisis gave Western countries a glimpse of what life is like when the energy supply isn't enough to go around. Worried that an even bigger crisis lies in wait, the European Commission is presenting an energy 'roadmap' on Jan. 10 that aims to steer the bloc's 490 million people in a different direction. The policies, of unprecedented scope, will carry a plain warning: High and volatile oil prices, surging demand, unreliable supplies and global warming compel Europe to reconfigure its energy supply before it's too late. It is Europe's response to one of the defining global problems of the 21st century. 'It's the biggest issue. It affects all of us. Just try living without energy for a few days,' said Elena Nekhaev, director of programs at the London-based World Energy Council, a non-governmental organization. The European Union, the second-largest consumer of energy in the world after the United States, is also the largest energy importer, looking abroad for just over half the energy it needs. Within 20 years, at current rates of consumption, the EU could depend on foreign suppliers for 70 percent of its energy, the Commission says... The European Renewable Energy Council, a Brussels-based industry group, says all but two of the European Union's 27 member states — Germany and Denmark — are shying away from binding targets for renewable energy production that are a central plank of the new policy.... In the meantime, the Commission wants Europeans to cut back on their energy usage, seeking a 20 percent reduction in consumption by 2020."
Europe lays out plan to tackle energy dilemma — but will governments and consumers balk?
Associated Press, 5 January 2007

"Norwegian oil and petroleum liquids production is expected to decline by about seven percent this year... Norway is the world's third-largest oil exporter, after Saudi Arabia and Russia, and is also the No. 3 gas exporter.... Even though the number of exploration wells drilled in 2006 doubled to 26 from the previous year, only four discoveries were made, the report said."
Norwegian oil production to decline in 2007, gas flows will continue to set records
Associated Press, 5 January 2007

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Peak Oil and Energy Crisis News Current Earlier Peak Oil And Energy Crisis News 2015 2014 2013 2012 2011 2010 2009 2008 2007	"If you speak to people in the industry, they will conceed that whatever my company may say publicly, we understand that we are facing decline in our own production and worldwide, we are not going to be able to produce more fuel liquids or crude oil in the near future... I was recently at a conference in New Mexico, sitting next to one of the recent CEOs of a major oil company and he, in response to a question from the audience, said 'of course I am a peakist, it is just a question of when it is coming' and I think that that is illustrative of once one is retired as a CEO, one is freer than one was in position to say I am a peakist. And what you hear privately from almost all people is we are coming to it.... I think that many of these politicians will ultimately find that the public blames them for its failure to warn them. Of course in a sense the public is responsible because it is the present public attitude to which politicians play up, and tell them what they want to hear but when the view of the world changes, what the public wanted to hear some time ago is no longer what they want to hear in the future." James Schlesinger, former US Energy Secretary Interview with David Strahan, ASPO 6, September 2007 "Oil ruled the 20th century; the shortage of oil will rule the 21st.... Last Tuesday the lead story in The Financial Times was the latest report from the International Energy Agency. The FT quoted the IEA as saying: 'Oil looks extremely tight in five years’ time,' and that there are 'prospects of even tighter natural gas markets at the turn of the decade'. For an international agency, that is inflammatory language.... 27 of the 51 oil-producing nations listed in BP’s Statistical Review of World Energy reported output declines in 2006. One projection of world crude oil production actually forecasts a 10 per cent reduction in total world output between 2005 and 2015. That would be a revolution..... Some analysts think that the peak oil moment has already been reached; some still think that it will not come until 2020 – which is itself only 12 years away. Market trends and the statistics both support the IEA’s view that consumption is accelerating and supplies falling faster than expected. Of course, if the 'crunch' point is only five years’ away for oil, and closer for natural gas, it has, for practical purposes, already arrived....The shortage of oil and natural gas, relative to demand, had already changed the balance of world power. Historians may well conclude that the US decision to invade Iraq was primarily motivated by the desire to gain physical control of Iraq’s oil and to provide defence support to other Middle Eastern oil powers. Political motivations are always mixed, but oil is an essential national interest of the United States. If the US is now deciding to withdraw from Iraq, the price will have to be paid in terms of loss of access to oil.... The world is coming to the end of the age of oil, which produced its own technology, its balance of power, its own economy, its pattern of society. It does not greatly matter whether the oil supply has peaked already or is going to peak in five or 12 years’ time. There is a huge adjustment to be made. There will be some benefits, including higher efficiencies and perhaps a better approach to global warming. But nothing will take us back towards the innocent expectation of indefinite expansion of the first months of the new millennium." Lord William Rees-Mogg Are these the last days of the Oil Age? London Times, 16 July 2007 "If Iraqi production does not rise exponentially by 2015, we have a very big problem, even if Saudi Arabia fulfills all its promises. The numbers are very simple, there's no need to be an expert.... Within 5 to 10 years, non-OPEP production will reach a peak and begin to decline, as reserves run out. There are new proofs of that fact every day. At the same we'll see the peak of China's economic growth. The two events will coincide: the explosion of Chinese growth, and the fall in non-OPEP oil production. Will the oil world manage to face that twin shock is an open question.... I really hope that consuming nations will understand the gravity of the situation and put in place radical and extremely tough policies to curb oil demand growth." Fatir Birol, Chief Economist, International Energy Agency Le Monde, 27 June 2007 "The world is consuming oil at a rate that will result in oil production peaking in 15 to 25 years, a group of geoscientists told the American Association of Petroleum Geologists' annual convention in Long Beach, Calif. When world oil production reaches the peak by 2020-30, the rate will be 90-100 million b/d, only 10-20% higher than it was in 2005. Depending on the level of world oil resources, which is highly uncertain, that peak is likely to last 20-30 years before production begins its ultimate decline. The estimates are released for the first time following an AAPG Hedberg Research Conference held in November 2006 in Colorado Springs.... Unconventional resources-tar sands and extra-heavy oil, oil shale, and oil from mature source rocks-provide a massive in-place resource. Each is known to have at least 3-4 trillion bbl. The problem with these unconventional resources is recoverability. Each faces a major challenge, whether poor quality oil (extra-heavy oil), poor quality reservoirs (oil from source rocks), or both (oil shale). Production of extra heavy oils and oil shale also requires substantial energy, enough so that oil shale production may be severely constrained by being mostly uneconomic due to a low net energy gain. The 75 Hedberg conference participants came from 18 countries on all six populated continents. " World oil production to peak in 15-25 years, AAPG told Oil And Gas Journal, 4 April 2007
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