Well (pun intended), this just about sums it up:
When the wells run dry
We use more oil than we find, and if producers are fixing their
figures the end could be closer than thought
Wednesday May 25, 2005
Predicting the end of the age of oil can be a sticky business. The
Association for the Study of Peak Oil and Gas (Aspo), a collection of
industry figures, politicians and academics, this week held its annual
meeting at the Gulbenkian Museum in Lisbon.
From quiet beginnings three years ago, Aspo is no longer just
"bubbling under" in being taken seriously. Delegates had to squeeze
past no fewer than 10 documentary crews, a nest of television cameras
and a phalanx of reporters just to grab their seat in the packed
Rather than talking about when oil could "run out", Aspo prefers to
predict that global production may be at, or approaching, its height.
The world is using more oil than it finds, and discoveries of oil
fields peaked in the 1960s. Despite technological advances since then,
new field discoveries are at an all-time low. This, said delegates,
has led to the current lack of any "cushion" between supply and
demand, and to the consequent high prices. The outcome for the world,
if Aspo is correct, is catastrophic.
Central to the organisation is the work of Colin Campbell, a geologist
and former executive vice-president of oil giant Total. Making the
meeting's keynote speech, Campbell talked about the "dawn of the end
of the age of oil" and the "end of economics".
Underpinning all of Campbell's, and Aspo's, work is the lack of
transparency in the world's oil data. Campbell drew attention to the
way in which members of the Organisation of Petroleum Exporting
Countries (Opec) "revised" their reserve figures in the 1980s, and
said that it is incredible that this "flawed data" is still being used
today. He highlighted the example of Kuwait, which scrubbed its
previous figures in 1985. Overnight, its reserves went from 64bn
barrels to 92bn barrels. As Opec allows production quotas tied to
stated reserves, this allowed Kuwait to pump more oil and immediately
make a lot more money.
Campbell showed how, two years later, the other countries in Opec,
outflanked by Kuwait's sudden action, followed suit. The United Arab
Emirates went from 31bn barrels to 92bn barrels. "Then came Iran,"
said Campbell. It declared its reserves had increased, but went one
better, going from 47bn barrels to 93bn. "And what of Iraq?" added
Campbell. "Saddam, as we all know, had some pretty strong views on
things, so he decided to come in at a round 100." Its previously
stated reserves were 47bn barrels.
Some 18 to 20 years later, these numbers remain unchanged. This
despite the United Arab Emirates, for instance, pumping millions of
barrels every week since the day it flipped its figures.
Campbell asserts that Opec members, and others such as Russia, are
stating the total amount ever found, not the amount left for us to
use. But such claims are not the preserve only of Aspo. This year, the
International Energy Agency, the International Monetary Fund and G7
members all demanded that Opec, and other producer nations, open their
fields to audit. Without knowing how much oil is left to pump,
decisions about any energy transitions - the move away from oil as a
predominant fuel - remain impossible.
Saudi Arabia, a major player in global oil production, in 1988 also
increased its stated reserves - from 170bn barrels to 258bn barrels
Just days before the Aspo meeting, Ali al-Naimi, Saudi Arabia's oil
minister, claimed the desert kingdom could move from producing around
9m barrels a day, to 12m or even 15m. This has been consistently
stated but, so far, unfulfilled by the kingdom and its state oil
company Saudi Aramco. What is more worrying is that Naimi for the
first time put a limit on that level of production: around 15 years.
Previously, the Saudis had said they could pump at this level for 50
or even 100 years.
Matthew Simmons, Aspo delegate, adviser on George Bush's energy plan,
and investment banker, is a leading expert on Saudi oil production. He
is sceptical about all the Saudi figures and his book on the subject,
Twilight in the Desert, is causing waves in the industry, despite not
hitting the shelves for another fortnight.
"No one can know how much oil Saudi Arabia has left underground,"
Simmons says. "A handful of people at Saudi Aramco think they know,
but no one really does. Why? Because Saudi Aramco has a kind of
omerta, a code of silence that runs through it.
"I met a guy a few years back, at a conference where I was the keynote
speaker. He was a senior engineer working for Aramco, senior enough to
be flown to Houston to hear me speak. Afterwards, I asked him the size
of Saudi Arabia's biggest field, Gharwar. Not in terms of reserves,
just its physical size. It was something I could have looked up on a
map, but I thought I would just ask him. He said: 'It's about 130
miles long and 15 to 20 miles across, but don't ever tell anyone at
Aramco I said that or I'll lose my job.'"
This revelation set Simmons thinking. "How could this senior figure be
so scared?" he asks. "After all, he wasn't telling me anything I
couldn't have found out myself. It amazed me and set me looking at
Saudi production in a whole new light."
Now Simmons believes that Gharwar, the biggest oilfield on the planet,
is definitely in decline. "It's got to be," he says. If he is right,
there is little left to replace it and the beginning of the end of oil
could be upon us sooner than we think.
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