Oil Woes

OIL WOES….The Wall Street Journal reports that a lot of mainstream players in the energy industry are suddenly buying into peak oil theory. But with a twist:

The new adherents — who range from senior Western oil-company executives to current and former officials of the major world exporting countries — don’t believe the global oil tank is at the half-empty point. But they share the belief that a global production ceiling is coming for other reasons: restricted access to oil fields, spiraling costs and increasingly complex oil-field geology. This will create a global production plateau, not a peak, they contend, with oil output remaining relatively constant rather than rising or falling.

….On Oct. 31, Christophe de Margerie, the chief executive of French oil company Total SA, jolted attendees at a London conference by openly labeling production forecasts of the International Energy Agency, the sober-minded energy watchdog for industrialized nations, as unrealistic….This is “the view of those who like to speak clearly, honestly, and [are] not just trying to please people,” he bluntly declared.

The French executive said many existing oil fields are being depleted at rates that will damage their geologic structures, which will limit future output more than most people allow. What’s more, some nations endowed with large untapped pools of oil are generating so much revenue from their current production that they feel they don’t need to further develop their fields, thus putting another cap on output.

The Journal reports a growing feeling within the industry that oil production could start to plateau at 100 million barrels per day by about 2012, a projection that seems pretty reasonable to me. My own instinct is that 100 million is sort of a theoretical maximum, and that the real-life plateau will be closer to 95 million or so, but 2012 is still probably a decent judgment for when we’ll get there.

A big part of these projections is some guesswork about how fast current oil fields are declining. If they’re declining slowly, then we need only a small amount of new exploration to keep total production climbing. If they’re declining quickly, then it’s almost impossible for new exploration to make up for lost production and produce enough extra to keep total production climbing. On that score, Stuart Staniford has a lengthy post today at The Oil Drum that “looks at how existing oil fields are apparently declining, and finds a trend suggesting those declines are worsening, though the reasons for this are not clear yet.”

If you’re interested in this stuff, read both pieces. The field production data is sort of hardcore peak oil wonkery, while the Journal focuses on real-life issues like political instability and oil exploration investment that will cause problems whether or not peak oil theory is correct. Unfortunately, they both point in the same direction.