Ron: not sure how reliable the info from XOM's CEO might be, remembering that some years ago they lied and had to restate how much reserves they actually had.
And the big 5 oil independents only account for about 15-20% of the world's oil production.
I work in oil patch offshore and am well aware of the discoveries that have been made, including a couple by PBR.
But finding oil and producing it are two different things and none of the oil discoveries you mentioned will be producing a drop of oil for several years at the earliest -- and a lot depends on the lifting costs since these new discoveries are under 10,000 ft. of water... incredible engineering challenges dealing with the temp and pressure at those depths -- none of it will be cheap oil.
OK, so more oil has been found in the last 5 years than the previous 20... as Cheney would say: "so what."
They have NOT found enough oil to replace what has and continues to be consumed over that time frame and that's what really matters.
In 5-10 years Mexico will be a net importer of oil as Cantarell depletes faster and faster -- a LOT faster than expected.
The Saudis and every other major producing countries don't seem to be able to increase production significantly even at $112/bbl.
Also, don't forget that nobody really knows how much recoverable oil there is from these recent finds -- they are guessing and won't really know until they prove them up with additional wells and testing... it has been my experience that the initial estimates are wrong -- way overstating potential recoverable reserves.
Remember DVN's Jack discovery? A couple year ago and yet nobody is really developing anything there just yet... will be a few more years before any of it reaches market.
If there is such an excess of supply, why aren't they producing more to cash in on these prices?
My company does biz with PBR and they aren't even in the planning stages yet for the two fields they discovered recently (yes, they found 2, not one) because there isn't enough drilling capacity or trained personnel to develop those fields while still operating in their existing fields.
Oil sands are promising, but bitumen is not oil and must be upgraded before it becomes oil and will flow through pipelines. Requires special refining.
This chart from wikipedia might shed some light on the topic:
And then there is the "lie" factor:
Since 1982 the Saudis have withheld their well data and any detailed data on their reserves, giving outside experts no way to verify the overall size of Saudi reserves and output.
Despite high oil prices, Saudi crude oil production declined to 8.60 million barrels per day (13,670 m³/d) in February 2007 (from an average of 9.55 barrels per day (1.518 m³/d) in 2005 and 9.15 barrels per day (1.455 m³/d) in 2006) and remained at that level before rising to 8.80 barrels per day (1.399 m³/d) in September. After US President Bush asked the Saudis to raise production on a visit to Saudi Arabia in January 2008, and they declined, Bush questioned whether they had the ability to raise production any more.
In fact, Dr. Ali Samsam Bakhtiari, a former senior executive of the National Iranian Oil Company, has stated unequivocally that OPEC's oil reserves (notably Iran's) are grossly overstated. In an interview to Bloomberg in July 2006, he stated that world oil production is now at its peak and predicted that it will fall 32% by 2020.
OPEC countries declare that the discovery of new fields, year after year, replaces exactly or near exactly the quantities produced, because the declared reserves do not vary a lot from one year to the other... Whodathunkit... what a coincidence that they claim to find exactly the same amount as they produced the year before -- and if you believe that one, you must also believe that the worst of the housing/banking problems are contained and behind us.
For example, Saudi Arabia extracted 9.55 million barrels per day (15,180 m³/d) in 2005, i.e., 3.4 billion barrels (540,000,000 m³) a year. Yet, their stated reserves do not decline, implying that they discover previously unknown reserves of exactly this amount, year after year. Abu Dhabi, in the United Arab Emirates, declares exactly 92.3 billion barrels (14,670,000,000 m³) since 1988, but in 16 years, 14 billion barrels (2,200,000,000 m³) were extracted.
Other examples suggest the inaccuracy of official reserve estimates:
* January 2006, the magazine Petroleum Intelligence Weekly declared that reserves of Kuwait were in fact only 48 billion barrels (7,600,000,000 m³), of which only 24 billion were "completely proven", backing this statement on "leaks" of official confidential Kuwaiti documents. The value is half of the official estimate.
* Shell company announced 9 January 2004 that 20% of its reserves had to pass from proven to possible (uncertain). This announcement led to a loss in the value of the stock; a lawsuit challenged that the value of the company was fraudulently overvalued. Shell later revised its reserves estimates three times, reducing them by 10,133 million barrels (against 14,500 million). Shell's president, Phil Watts, resigned.
* The reserves declared by Kuwait before and after the Gulf War 1990-1991 are the same, 94 billion barrels (14,900,000,000 m³), despite the fact that immense oil-well fires ignited by the Iraqi forces had burned off approximately 6 billion barrels (950,000,000 m³).
* In 1970, Algeria increased its "proven reserves" estimate (until then 7-8 billion barrels) to 30 billion. Two years later, the estimate was increased to 45 billion. After 1974, the country's estimate was less than 10 billion barrels (as reported by Jean Laherrère).
* Pemex (state company of Mexico) in September 2002 decreased its reserve estimate by 53%, from 26.8 to 12.6 billion barrels (2,000,000,000 m³). Later the estimate was increased to 15.7 billion.
* Other examples exist of reserves being underestimated. In 1993, the reserves of Equatorial Guinea were limited to some insignificant fields; the Oil And Gas Journal estimated them at 12 million barrels (1,900,000 m³). Two giant fields and several smaller ones were discovered, but the numbers announced stayed unchanged until 2003. In 2002, the country still had 12 million barrels (1,900,000 m³) of reserves according to the journal, while it was producing 85 million barrels (13,500,000 m³) in the same year. The reserves of Angola were at 5.421 billion barrels (861,900,000 m³), (four significant numbers, it gives the impression of great precision) from 1994 to 2003, despite the discovery of 38 new fields of more than 100 million barrels (16,000,000 m³) each.
There are serious doubts about whether OPEC countries really have the oil reserves they claim. This is similar to the illusionary oil reserves that U.S. oil companies claimed to have in the decade prior to the 1973 and 1979 oil crisis. In the 1970s, the companies were unable to produce as much oil as they claimed, and production went down instead of up.
The only oil inventories that might be "bloated" are the ones in holding tanks at refiners waiting to be refined, and the paper bbls where people claim to have X amount of oil on paper, but mysteriously the numbers never quite add up.
I hope that you are aware that 80% of the world's known oil is owned by governments, not the big 5 independents like XOM. Together the big 5 independent oil producers' reserves don"t add up to enough to sway prices except at the margins.
Pickens says that Mexico is a declining producer of oil, as are most other countries, naming the United States, Norway, Britain and soon, Russia.
"The world has been looked at," Pickens told Forbes. "There's still oil to be found, but not in the quantities we've seen in the past. The big fields have been found and the smaller fields, well, there's not enough of them to replenish the base."
Pickens predicted oil prices will rise this year to an annual average of around US$70 per barrel. On Wednesday, prices settled at US$61.79 on the New York Mercantile Exchange.
Global consumers, led by the United States, have already burned through 1.1 trillion barrels of oil, or what Pickens described as nearly half of the world's estimated 2.5 trillion barrels of historic oil supply. Other experts put total reserves at 3 trillion barrels and potentially more than 4 trillion barrels.
T Boone Pickens says U.S. government assumptions about the size of global reserves are based on skewed reporting by Saudi Arabia and others.
From now on, Pickens says, rising demand will be met by higher prices rather than ever-larger crude production.
Pickens also says that worldwide oil production not only WILL NOT increase significantly from here, but says it CAN NOT increase beyond current levels, regardless of how much oil is "discovered".
Also many people confuse the terms "oil reserves" (which is oil in the ground) with "oil inventories" which is typically a small amount in relation to reserves and is simply how much oil is in temporary storage awaiting refining or pumped into the SPR.
Worldwide consumption of oil is about 86 billion bbls/day and growing (albeit growing more slowly as economies slow; and production is about 87 billion bbls/day. T Boone says the production number is as high as it's going to get (he calls it Peak Production)... so if daily consumption/demand goes up even a tiny bit, there will be shortages and higher prices.
Don't you think that if someone COULD pump more oil while it's $112/bbl that they would? And if you don't think that's true, what plausible explanation would there need to be to justify not pumping as much oil as you can with prices this high.
In other words, we've had record high oil prices for many months now and yet production has not increased at all.
That's almost like the fact that silver dropped 15% in price the same week that all of the major dealers and even the US mint all said they were completely out of silver bullion. How can that be? How can the price go down if there is demand for it and nobody has any for sale?
Jim |
