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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: BigBull who wrote (68366)	6/16/2000 9:26:00 PM
From: kormac	Read Replies (2) \| Respond to of 95453

Hello BigBull, You and Tomas have been keeping us abreast of the various articles on what is happening around the world. Is the depletion already hitting us as Simmonds and Campbell have been saying for a couple of years now. Can OPEC really "turn on oil spigots at will"?. Here is a letter that Colin Campbell sent to NYTimes. It ought to appear there in a couple of days. ----------------------------- New York Times 16th June 2000 Dear Sir LETTER TO THE EDITOR OIL CRISIS The advent of international discussion groups on the Internet gives a new early warning of the issues that concern people around the world. To-day, the current oil crisis is at the top of the agenda, nowhere more so than in the United States, as it faces soaring import costs. Even Hawaii, the 50th State, asks what it will do if tourism dries up when fuel costs drive up air fares. The depletion of oil is such a simple concept. Think of it when you sip your next glass of beer. The glass starts full and ends empty, when all you can do is hope to order another. In oil terms, the world is now close to the half-empty mark, and ordering another glass means finding new supplies. How realistic is that ? Discovery peaked in the US Lower-48 in1930, with the corresponding peak of production coming about 40 years later. Discovery peaked in the North Sea in 1973, and it now faces peak production. The same pattern is being enacted around the world. It takes no feat of intellect to understand the pattern: the problem is to insert the right numbers. The oil industry has systematically under-reported the size of discoveries for good commercial and regulatory reasons, but that has misled many analysts into thinking that more was being discovered than was the case. Several OPEC countries announced huge, spurious reserve revisions in the late 1980s, as they vied with each other for quota based on reserves. Then there is the problem of what to measure: where to draw the boundary between conventional oil and non-conventional oil and how to treat liquids derived from gas. Lax definitions and reporting practices laid down a thick smoke screen. If we could blow it away, we would find that world discovery peaked in the 1960s, despite all the technology, new knowledge and a worldwide search for the largest remaining fields. About one trillion barrels of conventional oil are yet-to-produce, half lying in just five Middle East countries. Their share of world production was 38% at the time of the First Oil Shock in 1973, but had fallen to18% by1985 as new provinces in Alaska, the North Sea and elsewhere started to deliver flush production from their giant fields. They are found early, being too large to miss. Share has been rising since 1985 to reach about 30% to-day, but this time it is set to continue to rise because there are very few major new provinces waiting to deliver or even in sight. At a certain point, this growing share translates into another price shock. It will be different from the earlier shocks because it is driven, not by politics, but by the resource base itself and the immutable physics of the reservoir. The past peak of discovery, which is fact not theory, means that we can expect a global production peak around 2005. The US Geological Survey has recently released a range of estimates: the high probability case confirms this assessment. The price of Brent Crude had fallen to about $10 barrel in 1998 due to an anomalous combination of circumstances, but has been rising over the past 18 months. It reached a high of $32 in March of this year, but then fell in anticipation that US pressure would lead to greater OPEC generosity. On March 27th, OPEC offered to try to hold price between $22 and $28. Price slid further on this announcement which coincided with the arrival of previously dispatched cargoes. In early April, it reached a low of $21.50 before rebounding as the unseen hand of depletion re-exerted itself. The OPEC ceiling has now been breached, and it is becoming clear that there is no roof above it. Depletion rates in the Middle East are low, so there is scope to raise production, given time and investment, but what would be the result ? It would simply mean that the global peak would be higher and the subsequent decline steeper. That offers no long term solution. Policy objectives have to shift from increasing supply to reducing demand. A heavy burden of responsibility lies on the US as the world?s largest importer. By managing its demand, it could recover control of the depletion of the world?s oil, now entrusted to five Middle East governments. People are tempted to accuse oil companies or Muslims for their plight, but if they were given proper information, they would soon realise that they were not being gouged by anyone. They could then rise to the occasion, both finding solutions for themselves and giving governments the mandate for action. We are not running out of oil but face the transition to a new world in which abundant supplies of cheap oil-based energy can no longer drive the economy. There are many solutions but all have long lead times. The sooner we grasp the nettle the better. Yours very truly C.J.Campbell