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

To: Dwight E. Karlsen who wrote (41822)	4/7/1999 11:49:00 PM
From: Wowzer	Respond to of 95453

I thought this was an interesting post from the Yahoo RIG message board. I would be interested in hearing from some you oil experts on the validity of his argument. BTW I think this is one the best threads on SI. Thanks, Rory by: JoeDi123 2886 of 2894 I work on a trading desk mostly trading base and precious metals but also trade a fair amount of crude and gas for customers. This is from Offshore Magazine 2/99. The industry has not taken the issue of depletion serouly. Some have tended to scoff even at the mere concept, let alone its impact, as being synonymous with the world running out of oil. Nevertheless, it is a serious supply issue. It is now impossible to predict with any degree of reliability what the future rates of oil and gas production are likely to be without first understanding field by field depletion rates. The IEA, for instance, has already missed its fouth quater 1998 estimated rate of non-OPEC supply by 4.1 million barrles per day. This must be the largest revision to their published forecasts in their 25 year history. While their analysts tend to dismiss these supply revisions as one-time events, they are most likely driven by depletion rates in too many parts of the world now equaling to execceding the rate of supply addition. To put the issue in its most staggering context, the world now prodeces approximately 110 million barrles per day of oil and gas (BOE). If the gross rate of depletion is a mere 10% per annum over the next 11 years, then 83 million barrels per day of addded welhead oil and gas production is needed to merely cope with flat demand. If demand for oil and gas grew by only 1% per annum onver the same time, then the new supply additions need to total another 12 million barrles per day. Whether such rates of expansion are even physically possible given the limitations on rigs and manpower, particularly after the 1998 oil price collapse, it is a serious long-term energy issue that needs at least an intelligent debate. A reason to be long deep water drillers. The fist commercial discovery in the offshore GOM (up to 100') was in 1947 and 50% of the reserves were discovered in the first 10 years. The first commercial discovery for water depths of 100' to 300' occured in 1956 and 50% of the reserves had been discovered in the first 14 years. Finally, the first commercial discovery in water depths between 300' and 1000' occured in 1965 and 50% of the resevers were discovered in the first nine years. Senior oil executives at Venezuela's PDVSA have estimated that PDVSA needed to increase thier 1997 oil production by 1.2 million barrels per day to effect a net increase of 350,000 barrels per day as their gross depletion rate "using up" the additional 850,000 barrles per day. If the large oil companies are cutting back their driling programs they will only pay more later.