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Gold/Mining/Energy : Big Dog's Boom Boom Room

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To: Tommaso who wrote (92264)	10/19/2007 1:09:14 PM
From: Umunhum	of 206089

Bits and Pieces from ASPO Houston: I got a chance to talk to Matt Simmons right after Stuart Staniford’s talk on the Ghawar Field. He said that he has talked to a few senior people at Aramco and that there is no way they will ever produce 12 million barrels a day. He doesn’t know why they are publicly stating that they will have the ability to do so in a few years. I ran into Henry Groppe taking a break in the hall. I asked him for some stock picks and his two favorites are CNQ and Trican. I have never heard of Trican. He said they are a service company that is rapidly expanding in Russia. I haven’t done any DD on the company and know absolutely nothing about it. Chris Skrebowski gave a great presentation. He still has the peak sometime in 2011. He said that 2008 and 2009 are going to be fairly good addition years to supply – somewhere between 1.5 – 2 million barrels each year. I caught up with him later and said that a few years ago he had 2006 and 2007 as good addition years and a dearth in production from 2008 on – what happened?. He said the problem was that some projects have been pushed out and depletion is eating up more than he thought. He said I just report the numbers of what companies say they are going to do – my opinion is not involved in my report on the megaprojects. I am going to meet him for drinks tonight so I should be able to get his personal opinion. His take on the latest price was that the world has been on a plateau for several years now. Demand recently surpassed supply and we are eating into inventories. If production doesn’t rise going forward we are going to have a lot higher prices. Matt Simmons presentation was also excellent. He had several slides on China and the developing world that would turn any bear into a bull. He stated that Q4 demand is likely to exceed supply by 2-3 million barrels a day. He still thinks he’s got a great shot at winning his $200 oil price by 2010 bet. He said that when he was giving a presentation to a room full of petroleum engineers, he asked everyone there to raise their hand if they believe that the decline rate of oil production was between 1% – 5% and not one hand went up. 5% - 10% about half the people in the room raised their hand. And then above 10% and about half the people raised their hand. Richard Nehring was the only bearish presentation that I saw. He believes that the peak is going to be around 2020 and that $80 oil is going to spur a lot of secondary recovery projects on old fields that were produced years ago. Most people scoffed at the idea claiming that this will just make the down slope a little less extreme. There are some real pessimistic opinions on what is about to take place in Mexico. PEMEX is the largest indebted corporation in the world. It contributes 30% – 40% of the Mexican Governments revenues. These revenues are going to come to an end in the next 5 years and some people think Mexico could turn into something similar to Afghanistan or Pakistan. The U.S. will secure its border with Mexico over the next 10 years according to the pessimists. Jeffrey Brown's presentation on Peak Exports was music to a bull’s ears. I am going off of memory but I believe he stated that at a 4% decline rate and 5% consumption growth rate that in 2023, Saudi Arabia ceases to be an exporter. He had various models going forward where he tweaked the decline rate and the internal consumption growth of the exporter to get different numbers, but oil availability is going to get scarcer every year going forward. I believe this is the most important concept to grasp. Several of the speakers have said that we are going to look back at today as the good old days when oil was only $80 - $90 a barrel. They believe we are going above $200 a barrel. Several people have also mentioned that Putin is well aware of peak oil and intends on saving Russia’s resources for Russians. When I get back to Panama I am going to formulate a strategy to buy more crude oil future contracts.

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