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Report from the 7th International Oil Summit in Paris April 7, 2006
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Kjell Aleklett
, aleklett@tsl.uu.se
Professor of Physics, Uppsala University, Sweden
President of ASPO, the Association for the Study of Peak Oil & Gas,
www.PeakOil.net
An invitation to participate in the CNBC TV show “Global Players” brought
me to Paris. They planned to record the show in connection to
the 7th International Oil Summit
, http://www.globalplayers.tv/
A major topic for the oil summit was much discussion about needed collaboration
between National Oil Companies (NOCs), and International Oil Companies (IOCs).
More then 75 % of remaining oil reserves are in the hands of NOCs and IOCs
are producing at maximum capacity using all available technology. Hence
it is easy for anyone to understand why IOCs are eager to convince the NOCs
that they need new partners in the future. Chevron is the perfect company
to use as an illustration of the problem. According to their experts they
are using advanced technology but production is declining. Chevron is facing
Peak Oil and Peak Oil is reality, but none of the seminars at the summit
addressed this problem.
Claude Mandil, Executive Director of the International Energy Agency (IEA)
was first on stage. He saw no peak in the demand before 2030. Different scenarios
yielded demands from 111 to 123 million barrels per day (mbpd) in year 2030.
He showed a figure with demand increases for the years 2004 to 2010. The
conclusion was that the demand growth was 1.5 mbpd per year over the next
5 years. The oil industry has for several years claimed that the production
from existing fields is declining at around 5 % per year or a decrease in
production of about 4 mbpd each year. Adding the increase in demand and the
decline we get that an extra 27 mbpd is needed in new capacity in the next
5 years. Projects adding the 7.5 mbpd were discussed but the decline in existing
fields was not mentioned. A question to Claude Mandil about this decline
got the answer that fields have always been declining and so far this has
not been any problem.
Mohammed Barkindo, Acting Secretary-General of OPEC, discussed the increasing
demand as the oil producing countries see it. For them it is important to
have security in demand. If different scenarios showed that there is an uncertainty
of 12 mpbd, one should not expect that OPEC will make investments that bring
the production into the uncertainty region without the security of high oil
prices.
In the next section three ministers from oil producing countries got the
opportunity to address the future of oil policies in context of high oil
prices. His Excellency, Edmund Daukoru, President of OPEC and Minister of
State for Petroleum Resources in Nigeria, claimed that he saw no problems
when it comes to resources. OPEC has a spare capacity of 2 mbpd. The problems
can be found on the down stream sector. Refineries are not prepared to take
the oil that is available today. They need to make investments to handle
sour oil.
Security of demand was the key issue for His Excellency Abdulla Bin Hamad
Al-Attiyah, Second Deputy-Premier and Minister for Energy and Industry of
Qatar. But first he proudly told us that Qatar last year had the highest
increase in GDP in the world, and the increase this year was also very high.
Qatar is just now investing heavily, but the problem is that price of materials
like steel and cement have increased threefold or more. If these investments
to increase production are to continue they need firm security of demand.
He also pointed out that OPEC did not set the price of oil. Traders around
the world set the price for OPEC.
The third minister to address the summit was His Excellency Mohamed bin Dhaen
Al Hamili, Energy Minister of the United Arab Emirates. He discussed reserves
and pointed out the fact that the reserves outside the Middle East will only
last for 22 years at today's production rate while the reserves in the Middle
East will last for 88 years and this shows that the production in the Middle
East will be even more important in the future. This is exactly what Dick
Cheney said in 2001 in the US energy policy document: “In year 2020 around
54 to 67 percent of the world production of oil needs to come from the Middle
East.”
In the discussion Claude Mandil had trouble understanding that OPEC needed
the guarantee of security of demand, as it was so obvious that demand was
increasing. The call on OPEC is enormous. In the IEA 2004 World Energy Outlook
the base scenario has an increase for OPEC from 28.2 mbpd in 2003 to 64.8
mbpd in 2030 and 33 mbpd of this increase is to come from the Middle East.
Producers in the Middle East must double their oil production. This is not
possible, but it looks like the producers are unable to bring themselves
to say that. The request for a guarantee of Security of Demand, that never
will be given, might be another way to say that it is not possible to double
the production. I think it is time for OPEC to start to discuss sustainable
production. In this discussion one has to include two components. (1) The
fact that you can not over-produce an oil field without damaging the total
production from the field and (2) that the countries in the Middle East are
heavily dependent on revenues from the oil industry. When these revenues
start to decline the whole region might start to decline. The Middle East
is now helping us with energy, who will help the Middle East then?
In the session about Access to Oil & Gas, the oil industry got the opportunity
to tell their part of the story. Norsk Hydro, Shell, Total and Chevron all
presented great commercials for IOCs. A summary is that they all think
that NOCs need help in the future. It is easy to understand that they want
to have this collaboration as reserves for the IOCs are declining much faster
then for NOCs. A question from me about the steep decline in the North Sea
and the fact that production for Chevron is declining even though they are
using all available technology got the following answers.
Tore Torvund from Norsk Hydro explained that technology had doubled the total
output but they now were very surprised to see the very high decline rates.
In 2005 the production in Norway declined by 10 percent. The Chevron chief
economist Edgard Habib explained the decline with the fact that it was a
mature industry.
When Peak Oil was brought up it was interesting that Malcolm Brinded, executive
Director of Exploration and Production for Shell, accepted that easy oil
now is peaking, but saw no problems in increasing production steadily to
2020. Production from deep water, Arctic oil, heavy oil, oil sand and oil
shales should be sufficient. On the other side we have Christophe de Margerie
(head of exploration for Total) who claims it is time to find out what the
maximum production capacity might be and when it will occur. ASPO, the Association
for the Study of Peak Oil & Gas, has long been tackling these questions
seriously.
Questions from the delegates from China indicated that they were worried
over the price of oil. In a private discussion with Claude Mandil he told
me that the world can never reach a production of 115 mbpd. This is the IEA
2005 basic scenario figure down from 123 mbpd in 2004. We might soon see
scenario estimates of 100 mbpd from IEA instead of 115. We will soon be facing
the fact that an increasing import demand from China must result in a decline
of the imports in other parts of the world.
Kjell Aleklett
Professor of Physics, Uppsala University, Sweden
President of ASPO, the Association for the Study of Peak Oil & Gas,
aleklett@tsl.uu.se
www.PeakOil.net
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