2005 will be the Peak: Oil demand may outstrip supply this year, Talisman Energy warns
May 4, 2005
Rising oil demand could severely strain the world's oil production and transportation systems late this year, predicts Jim Buckee, chief executive officer of Talisman Energy Inc.
"The system will be tested," Mr. Buckee said yesterday after Talisman's annual meeting. He suggested that projected demand of 86 million barrels of oil a day in the fourth quarter may not be met by enough supply.
While there have been predictions that global oil production eventually will rise past 100 million barrels a day, Mr. Buckee questioned whether the world will ever be able to produce 90 million barrels a day.
The average oil supply this year could be 84.8 million barrels a day, FirstEnergy Capital Corp. said in an April 12 report, up from 83 million last year. Next year's supply is predicted to be 86.4 million barrels a day.
During the Talisman annual meeting in Calgary, Mr. Buckee said conservation and energy efficiency was the "most important" way to reduce oil demand, adding that widespread use of alternatives to oil and natural gas was "extremely unlikely."
He made the statement just as the Organization for Economic Co-operation and Development ended a two-day meeting in Paris, where energy ministers from 26 rich countries issued a statement that said: "Today's [oil] prices demand action to stimulate and diversify energy supply and curb demand."
Talisman, which operates in North America and around the world, is a huge beneficiary of high oil prices. First-quarter results were issued yesterday and the company said its cash flow surged 25 per cent to a record $960-million or $2.59 a share for the period ended March 31, up from $770-million or $2.01 a year earlier.
Cash flow is a key indicator of a company's ability to fund future exploration, which for Talisman this year will include work in various places, including North America, the North Sea and southeast Asia. Mr. Buckee said Talisman will also drill a well in Qatar in November, near an area of notable gas discoveries.
He said the market for acquisitions is "very heated" and Talisman hasn't found promising leads, despite looking regularly.
He also said Talisman did not make a bid for First Calgary Petroleums Ltd., an upstart that has made a large find of gas in Algeria but has no production. First Calgary is looking to sell itself, but its stock has lost about 45 per cent of its value since mid-February as investors worry about what a final offer might look like.
Talisman increased its dividend by 13.3 per cent to a total of 34 cents a year per share, paid semi-annually. The stock still yields less than 1 per cent.
Talisman said its first-quarter profit was $258-million or 68 cents a diluted share, up 18 per cent from $218-million or 56 cents a year earlier. Revenue, excluding royalty payments, was $1.68-billion, up from $1.26-billion. TLM (TSX) fell $1.04 to $37.65. SOURCE
"I think this coming fourth quarter will be the litmus test," as oil producers may not be able to meet world demand that is expect to rise to 86 million barrels a day. With oilfields declining by 5% a year, half of oil demand in 20 years will have to come from new sources. he said. "If [demand] goes to 120 million barrels, we need a new 60 million barrels a day, so that is [the equivalent of] six new Saudis, which I think is patently unlikely." "I am watching that very closely. We will know what the situation [on whether the oil peak is approaching] really is." SOURCE
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