The Oil Drum

Interesting article on Nigeria's contribution to the oil supply, how it is off schedule, and, more importantly, why...(thanks to 'Oil Man' for pointing that out...) http://www.nytimes.com/2005/12/09/international/africa/09flames.html?hp=&pagewanted=print

I know that some readers aren't so happy when we seriously entertain the abiotic oil theory here. Others of you, however, have compellingly argued (IMHO) that as the concept of peak oil becomes more prevalent, we're going to see more and more people rallying to the side of abiotic oil, well, because it's a lot more comforting than peak oil itself it. I was looking around the web today, and I came across a website (which I probably should not even be linking to) that had a small blurb mentioning that Rigzone pulled Corsi's "Black Gold Stranglehold: The Myth of Scarcity and the Politics of Oil" off their website. In the comments, people there started to discuss abiotic oil, and one response in particular got me to thinking.

MILWAUKEE--(BUSINESS WIRE)--Dec. 8, 2005--800-CEO-READ, the leading distributor of business books in the country, today released their annual list of top-selling books. Twilight In the Desert was #13 on the list. (link) (hat tip: peakoil.com)

Keep on threadin' in the free world...

NEW DELHI - Stung by the rising international price of oil and domestic shortages coupled with high requirements of a growing economy, India has revived a plan for an oil and gas grid for the Asian continent.

The excellent British newspaper The Independent quoth: A detailed and disturbing strategy document has revealed an extraordinary American plan to destroy Europe's support for the Kyoto treaty on climate change.

Those following the various Megaproject prediction tables can now put a tick mark beside White Rose the Canadian site off Newfoundland, which has just started shipping oil, and is on track to reach its targeted 100,000 bd by early next year.   I began my day by watching the Matt Simmons DVD as I did my exercising for the day.  The advantage of these four-hour tapes is that they allow the subject to range over a variety of different topics and you get a lot more information than just looking at the slides (which can be found under Matt Simmons speeches). So far I have heard the interview explain the story of A Dickens Walk Through Energy (52nd Annual Houston Consular Forum, Lakewood Yacht Club, Seabrook, Texas, October 24, 2003), and watched the presentation to the CSIS (The Saudi Arabian Oil Miracle, Center for Strategic & International Studies, February 24, 2004).   Coming back from the Denver Oil Conference I had also brought the Colin Campbell interview and the End of Suburbia.  I prefer the Simmons interviews if you wish to only get one.  Lots of nugget information (Saudi Arabia has 5,000 wells, Russia has 170,000, the US has over 500,000 producing wells were numbers that got my attention among much else). (UPDATE Having now watched the Q & A for the CSIS meeting, Dr Saleri said it takes 21 days to drill a conventional well in Saudi Arabia, 40 - 50 days to drill a horizontal well.)

Everybody seems to have an opinion about where oil prices are headed and a rationalization for their prognostication.  Lee Raymond at Exxon keeps jawboning for $25/bbl oil.  John Browne at BP suggests oil prices will "settle" at around $40/bbl.  OPEC's acting secretary general recently stated that OPEC's target price is between $40 and $50 (Petroleum Intelligence Weekly, Nov. 21 edition - requires paid subscription.)  Oil pundits working for consulting companies, investment banks, the EIA etc. are predicting 2006 prices of about $58/bbl (average of 11 estimates ranging from $70 to $47/bbl - published in the Petroleum Intelligence Weekly Nov 14 edition.)  The NYMEX futures market is "predicting" $60 to $61 through 2007, with prices in the mid-$50's out through 2012.  Matt Simmons, on the other hand, made a $5000 bet that oil will be higher than $200/bbl by 2010. Whose prediction is closer to the truth (as we know it today)?  What are these people's motivations?

The world is not running out of oil, and fears of "peak oil" are prompted more by outdated reserve reporting requirements than anything else, an industry analyst told a U.S. House panel today.

Big Gav with an interesting discussion of some of the current trends in the peak oil meme.  Recommended. (I also recommend the Tetlock book that Dave Roberts spoke of the other day that BG talks about in this post.) http://peakenergy.blogspot.com/2005/12/peak-oil-and-philosophers-stone.html

I recently saw Syriana, which is going to be in theaters "everywhere" starting on Friday. This will not be a comprehensive movie review, just a few thoughts about the film. I should say that the opinions here do not reflect the official views of The Oil Drum, only my personal thoughts. This is a great looking, well-acted, big budget Hollywood production with some of the biggest movie stars around. It was directed by Steven Gaghan (who wrote the screenplay for Traffic) and written by Gaghan and Robert Baer, a former CIA agent. Some of the movie is based loosely on Baer's non-fiction book See No Evil. If you come to this movie expecting an engaging politicial thriller, you will enjoy yourself. If you are expecting this movie to change the way everyday people think about the impact of oil on our lives, you will be disappointed. Syriana examines our dependence on foreign oil from several interwoven perspectives, much like Traffic explored the U.S. "War on Drugs". The interconnected storylines feature an over-the-hill CIA agent (George Clooney), an ambitious and opportunistic energy analyst (Matt Damon), a lawyer for large U.S. oil company (Jeffrey Wright), a reform-minded Arabian prince (Alexander Siddig), and two Pakistani men who are laid off from their jobs in an Arabian oil field. If you think this plot sounds complicated, you are right. The plot of Traffic was similarly complex, but made excellent use of cinematographic effects to delinate the different storylines. Syriana does not use such techniques, and the result is a movie that is hard to follow. It strikes me as the kind of movie that is more enjoyable after a second viewing, but having only seen it once, I cannot say for sure. Spoilers below the fold.

This floor is yours.

... the irresistible force meets the immovable object? Which is mightier: the logistic equation with it's stern command that production shall increase no more? Or these two-and-a-half billion people with their exponential desire to drive? Oil consumption of China and India as reported by BP Statistical Review of World Energy.

... the irresistible force meets the immovable object? Which is mightier: the logistic equation with it's stern command that production shall increase no more? Or these two-and-a-half billion people with their exponential desire to drive? Oil consumption of China and India as reported by BP Statistical Review of World Energy.

The December EIA Short-term Energy Outlook reports that total US energy demand has remained flat this year, but is expected to grow by some 2% next year.  Which is a cue to an observation.  In the discussion on demand destruction generated by increased fuel prices, the usual assumption has been that the poorer countries are the first that will see the impact.  But, as the recently changing situation in regard to US gas demand is starting to show, demand destruction will also happen here.  It is beginning with industries that depend on a cheap source of natural gas  for their feed stock.  To a degree it is not an absolute destruction yet. One imagines that the fertilizer shortage, generated as plants close in the US, will be met by new plants, built in countries that still have an abundance of natural gas.  The industries that rely on cheap feedstocks for plastic manufacture may well be next.  And as these industries leave, so the demand (and unfortunately also the employment) will decline with it. The EIA report anticipates that this drop in demand will be 7.5% this year, though they expect 4.6% of this to come back next year. The EIA report is now predicting that by March some 0.66 bcf of GOMEX natural gas (6.5% of production) and 297,000 bd of GOMEX crude oil (19% of production) will still be shut-in relative to  the pre-hurricane status.  All three of refineries that are still down are anticipated to be on line at the end of February, bringing back some 804,000 bd of production, just in time for the end of the heating season.

When we write about the developing problems in supply of oil and natural gas, the response, whenever there is a drop in price, is that we are totally wrong, rather than recognizing that there are still fluctuations between levels of supply and demand.   In this regard there is a potential in the near term for a drop in natural gas prices, as noted by Harry Chernoff due to a significant reduction in demand.  His "back of the envelope" calculation is that the drop in demand from the shut down of industrial operations such as ammonia manufacture, now exceeds the amount of gas still shut-in in the GOMEX. There is thus a current build up in supply that may, depending on how demand changes with the cold in the short term, lead to significant changes in the price of gas.The point is that unless the weather loads are substantial enough to maintain the market perception of potential end-of-season shortages, gas prices are vulnerable to a 20-30% drop even with no change in oil prices. Unfortunately this is only going to be a short-lived phenomenon.

Well the winter is not starting off all that well.  Already the OGJ reports that the below normal temperatures already being felt in the eastern two-thirds of the country will, according to the National Weather Service, continue for this month.  The result is anticipated to be an 18% increase in the demand for heating oil through this week.  (From a base of around 4 mbd according to the EIA). It is the relative immediacy of shortfalls, whether this year, or in the next two, that will start to test the true international collaboration on energy supplies, and for how long oil and gas will remain fungible.  It is well and good to drill wells in Kazakhstan but without the pipelines to get the oil to a friendly port, the availability of the oil discovered will remain in question.  

I wanted to highlight and extend a very important point made by WesTexas the other day, which is that the Hubbert linearization method has a lot to say about future decline rates. And what it has to say is rather optimistic (at least by the admittedly low standards of the Peak Oil community). If you believe the Hubbert theory, average net decline rates in global production will be quite low for several decades. Hubbert-style prediction of future global oil production decline rates, together with recent year-on-year change in BP production data (inc NGLs), and a linear fit to the BP data.

It's a Monday, and cold, so be our guest.

One of the constant retorts heard mostly from economists, is that all efforts to reduce oil consumption just creates an incentive for someone else to consume it instead - the old Jevon's Paradox. The best way that I have come up with to answer to Jevon's Paradox is through a combination of efficiency gains and society-level agreements on total consumption. Richard Heinberg has outlined his own ideas on a society-level protocol to deal with oil depletion in a equitable and peaceful manner. In Montreal, there is a conference discussing climate change in an air of pessimism about global agreements. The Kyoto Protocol, despite coming into effect in February 2005, is largely seen as a failure since high-growth developing nations like India and China have publicly stated that they would never accept limits on their emissions and the Bush administration has refused to sign.