Oil output will depend on investment, not reserves: CGES
Oil output will depend on investment, not reserves: CGES
JAN 12: Pumping more oil depends on investment and government policies, because the technology exists to find new reserves and extend the life of existing fields, the Centre for Global Energy Studies said.
Lack of oil won’t limit output until at least 2020, according to a CGES study compiled by Manouchehr Takin, a senior analyst at the center and a geologist. The study reflects the ‘optimistic side of the peak-oil theory,’ Takin said in an interview. ‘Peak oil’ theorists argue that oil production is beginning to fall because limits on supply have been reached.
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‘‘The volume of global oil production in the next 10 to 15 years will depend more on specific private and public sector policies and initiatives than on the availability of subsurface oil resources,’’ Takin wrote in an e-mailed statement from the CGES, which was founded and is chaired by a former Saudi Arabian oil minister, Sheikh Ahmad Zaki Yamani.
Traders in the oil market are increasingly questioning how much crude oil is available, Goldman Sachs Group Inc. said in a report last month. Spare production capacity has dwindled after an unexpected jump in oil demand in the past two years, reflecting decades of underinvestment to extract the fuel that provides more than a third of the world’s energy.
Higher prices make it profitable to explore for oil. As long as operating costs remain lower than prices, production will continue at the maximum rate technically possible once a field has been developed, the CGES said. Average operating costs are now $1 to $5 a barrel, the center said. Crude oil sold for about $65 a barrel in New York today, almost double the level of two years ago.
‘‘The critical issue will be the amount of effort going into actual operations around the world to develop the known reserves, improve the recovery factors in the producing fields and conduct serious exploration work,’’ the CGES said.
To develop capacity of 100,000 barrels per day in the Middle East, where costs are the lowest, costs about $500 million, the CGES said. To add the same capacity in the North Sea, the former Soviet Union, West Africa or North America requires $1.5 billion to $2.5 billion. Exploitation of non-conventional oil resources, such as oil sands or heavy oil, will cost $3.5 billion or more.
Improved coordination between geologists, field workers and management at oil companies, combined with technology, could add ‘some hundred billion barrels’ to global oil reserves, according to Takin, who worked for BP Plc’s Amoco Corp. in the US and was senior researcher for Opec in Vienna.
‘‘Technology has developed in a way that when a well is drilled a lot of testing can be done at the same time,’’ Takin said. Data is transmitted to a head office and you may have a specialist geologist interpreting pressure, looking at 10 rigs simultaneously and discussing results with management. Companies have agreed to have a multidisciplinary team.
Global oil reserves range from 2 trillion to 3 trillion barrels, of which less than 1 trillion have been pumped so far. Saudi Arabian Oil Minister Ali al-Naimi and Exxon Mobil Corp. President Rex Tillerson say supplies will last for decades. Recoverable reserves could be as high as 7 trillion, Tillerson said in September. So far, even during periods of rapidly growing consumption from the 1950s through the 1970s, supply has satisfied demand, according to the CGES.
‘‘There’s still further huge scope for increasing supply and production capacity through novel techniques as the technology is still relatively young,’’ Takin wrote. ‘‘World oil production hasn’t yet reached its maximum plateau rate.’’ Supplies will decline sooner and faster than expected unless investment increases for many years, UBS AG analyst James Hubbard, a former oil engineer at Schlumberger Ltd., said in an interview last month. Skeptics center their doubts on Saudi Arabia, the world’s largest oil exporter. Matthew Simmons, chairman of the energy investment bank Simmons & Co. and author of ‘‘Twilight in the Desert:
JAN 12: Pumping more oil depends on investment and government policies, because the technology exists to find new reserves and extend the life of existing fields, the Centre for Global Energy Studies said.
Lack of oil won’t limit output until at least 2020, according to a CGES study compiled by Manouchehr Takin, a senior analyst at the center and a geologist. The study reflects the ‘optimistic side of the peak-oil theory,’ Takin said in an interview. ‘Peak oil’ theorists argue that oil production is beginning to fall because limits on supply have been reached.
-->
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Detailed Energy ResearchInstant access to Wood Mackenzie oil, gas and power reports.www.woodmac.com
Make Your Own BiodieselFrom used cooking oil. Free book contains full details and much morewww.electricitybook.com
2004 world energy dataoil, gas, coal, power by sector special offer: free database updatewww.enerdata.fr
Commodity prices & chartsFree oil, gold, metals, softs Plus Gtis Forex world equity quoteswww.advfn.com
‘‘The volume of global oil production in the next 10 to 15 years will depend more on specific private and public sector policies and initiatives than on the availability of subsurface oil resources,’’ Takin wrote in an e-mailed statement from the CGES, which was founded and is chaired by a former Saudi Arabian oil minister, Sheikh Ahmad Zaki Yamani.
Traders in the oil market are increasingly questioning how much crude oil is available, Goldman Sachs Group Inc. said in a report last month. Spare production capacity has dwindled after an unexpected jump in oil demand in the past two years, reflecting decades of underinvestment to extract the fuel that provides more than a third of the world’s energy.
Higher prices make it profitable to explore for oil. As long as operating costs remain lower than prices, production will continue at the maximum rate technically possible once a field has been developed, the CGES said. Average operating costs are now $1 to $5 a barrel, the center said. Crude oil sold for about $65 a barrel in New York today, almost double the level of two years ago.
‘‘The critical issue will be the amount of effort going into actual operations around the world to develop the known reserves, improve the recovery factors in the producing fields and conduct serious exploration work,’’ the CGES said.
To develop capacity of 100,000 barrels per day in the Middle East, where costs are the lowest, costs about $500 million, the CGES said. To add the same capacity in the North Sea, the former Soviet Union, West Africa or North America requires $1.5 billion to $2.5 billion. Exploitation of non-conventional oil resources, such as oil sands or heavy oil, will cost $3.5 billion or more.
Improved coordination between geologists, field workers and management at oil companies, combined with technology, could add ‘some hundred billion barrels’ to global oil reserves, according to Takin, who worked for BP Plc’s Amoco Corp. in the US and was senior researcher for Opec in Vienna.
‘‘Technology has developed in a way that when a well is drilled a lot of testing can be done at the same time,’’ Takin said. Data is transmitted to a head office and you may have a specialist geologist interpreting pressure, looking at 10 rigs simultaneously and discussing results with management. Companies have agreed to have a multidisciplinary team.
Global oil reserves range from 2 trillion to 3 trillion barrels, of which less than 1 trillion have been pumped so far. Saudi Arabian Oil Minister Ali al-Naimi and Exxon Mobil Corp. President Rex Tillerson say supplies will last for decades. Recoverable reserves could be as high as 7 trillion, Tillerson said in September. So far, even during periods of rapidly growing consumption from the 1950s through the 1970s, supply has satisfied demand, according to the CGES.
‘‘There’s still further huge scope for increasing supply and production capacity through novel techniques as the technology is still relatively young,’’ Takin wrote. ‘‘World oil production hasn’t yet reached its maximum plateau rate.’’ Supplies will decline sooner and faster than expected unless investment increases for many years, UBS AG analyst James Hubbard, a former oil engineer at Schlumberger Ltd., said in an interview last month. Skeptics center their doubts on Saudi Arabia, the world’s largest oil exporter. Matthew Simmons, chairman of the energy investment bank Simmons & Co. and author of ‘‘Twilight in the Desert:
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