All, an aritcle today that Brazil is trying to change the rules for oil exploration. They want changes to "protect" new offshore finds, the presalt play. All of sudden, they are questioning whether the government should take a bigger piece of the pie. Sounds familiar. They are now an exporter and have a booming ethanol industry and they want to reconsider the incentives for foreigners. It just seems to me the the major impediment to oil supply growth may not be physical but political. They cite Venezuela and Nigeria as the models for future business arrangements. You have an incompetent nationalized Mexican industry, a Russian government that wants to use energy as a political weapon, major players in the middle east that have more cash flow than they can reinvest, Iraq with major reserves but no stability, Iran which wants to cripple the western world. Even our political leaders don't want to tell people that you can't have $1.50 gas while they restrict drilling in the most prospective areas of our country.
Couple this with the major growth economies subsidizing oil prices and $100 plus oil is not surprising. Even our monetary policy has contributed to over consumption with interest rates that have been too low for too long. My bet is that normalized oil prices are much lower than the current price, the world will find new reserves if politicians cooperate (a big if), alternatives will develop to take some pressure off demand, we will begin to drive cars that get double the mileage. The last thing has already started. Which one of the US car makers will be bankrupt first? It will be messy but we will probably come out the other side in much better shape. Hare
Hare, Be very careful with projections of oil from new fields. One example: Kashgan Field in the Caspian off Kazakstan. Discovered in 2001 by a group of international oil companies. Touted to be a giant with 220 B bbls, then 32 B bbls, and now 13 B bbls. BP and Statoil looked at the difficult geology and weather and quietly sold their interests. One big problem, shallow water with ice packs and lots of storms--not good for platforms. First production planned for 2005. First production now planned for 2011. Stay tuned.
The sad truth is many oil deposits are very difficult to tap because of low permeability, viscus oil, or lack of a gas or water drive. It will be interesting to see if the new discoveries at almost 30,000 ft deep work out.
Matt Simmons had developed a method of looking at oil fields. Forget reserves. He just tabulates fields that produce 100 K bbls/d or more. There are very few new fields a year in this group. If you look at 85 M bbls/d and a conservative decline rate of 5%, then over 4 m bbls/d of new production has to be found each year to keep producion constant. It is not being done. Russia, Mexico, and Iran alone lost about 1.5 M bbls/d since last year.
By the way, Iran wants to produce more but for many years the US has pressured the international oil and gas majors not to work in Iran. A case, in my opinion, of shooting ourselves in the purse. Regards, Hugh
Hugh, I don't have a technical background but it surprises me to see how our assumptions are exploded with regard to new technology. Take the Bakken formation in ND, Montana. Around a 100 million barrels have been produced from the formation over the past 50 years. Now, the recoverable reserves are estimated at something around 4 billion barrels. And, you are right, that is a fraction of the oil in place, could be 500 billion barrles, because of the low permeability. I'm betting that while we don't know where the resources will come from, they are there. And the alternatives will be developed contemporaneously. Also, the oil shale possibilities in the western US are not getting much press. We will find the reserves but they won't be cheap. Hare
What the article has to say about the last 10 years history is absolutely true and a little surprising: Our ability to store rose only from 3.3 Tcf or so to 3.6 Tcf or so with almost all of the increase coming in the last several years. Note that the storage amounts noted in the article include base gas at around 4 Tcf.
I'd say that if storage capacity increases another 100 Bcf this year that will put additional pressure on pricing because, given the interest in hydrocarbons, if there is capacity, someone will want to fill it with product.