by BJÖRN LINDAHL
The International Energy Agency, IEA, has made a significant downward adjustment in its prognosis for oil production up to 2030. That is an important explanation for the latest rally in oil prices. Yesterday, the price for American oil passed $135 per barrel.
According to the Wall Street Journal, the IEA, which represents 26 industrial nations, will adjust its estimate of oil production in 2030 downwards from 116 million barrels of oil per day to 100 Mbpd. The world’s oil production today lies at 85 Mbpd.
The oil investments that are needed will be high, much higher than what people have believed. It is a dangerous situation, said the IEA’s chief economist, Fatih Birol, to this newspaper.
However, for those that have, for a long time, been warning that the world is approaching its maximal rate of oil production, (or “Peak Oil” as it is usually called in English), the downward adjustments are too little too late.
The IEA takes one step at a time. Even the prognoses of oil production at 100 million barrels per day in 2030 are completely unrealistic. We will most probably see additional downward revisions, said Kjell Aleklett, who leads research on Global Energy Systems at Uppsala University.
Every year the IEA publishes a study of the world energy situation called World Energy Outlook. For this year’s report, the IEA has used 25 analysts to examine the world’s largest oil fields and how production from these will develop.
A similar study was performed by Fredrik Robelius at Uppsala University in 2007 (to the thesis). His Ph.D. thesis has rapidly become the fourth most downloaded thesis at the University. Its introductory summary is the most downloaded of all.
An oilfield is called ”giant” if it contains at least 500 million barrels of extractable reserves. Only about 500 such fields exist in the world. The giant fields are only 1% of all oilfields but, in 2005, they accounted for 60% of global oil production and 65% of the world’s total reserves.
Most of the giant fields are old, in some cases older than 50 years. Many, such as the Mexican Cantarell field are past their production peak. After the peak, production decreases rapidly.
-Every year production from the world’s existing, conventional oil fields decreases by 3.5%. Therefore, to maintain production at the current level, every year one must find new oil fields that can produce 2.5 million barrels of oil per day, said Kjell Aleklett.
Despite the fact that the price of oil has more than quadrupled during the last three years, and despite that, every available oil rig is being used to look for more oil, we have not found new oil fields at the rate required.
-We do not believe people realize the implications that declining production from existing fields has for the supply of energy. Furthermore, this is a development that will only accelerate in the future, said Fatih Birol of the IEA.
He initially intended to present the prognosis this coming November but chose to release the results now.
The respected oil analysts of the investment bank Goldman Sachs are now advising their customers to pull out of the spot market, (i.e. contracts for delivery within months) and, instead, to invest in contracts with longer delivery times.
Now that many appear to have followed that advice it has created problems for speculators who anticipated lower future oil prices. It has caused the price of oil for long term delivery to rise faster than for short-term contracts.
Ghawar, Safaniya, Cantarell, Burgan, and Rumaila are names that most Swedes do not associate with anything in particular, other than that they sound exotic. These giant oilfields have meant that the world has had cheap energy for many years. But soon that will end
Ghawar is the giant of giants: Saudi Arabia’s largest oil field, with a daily production of 4.8 million barrels. That is half of what the nation produces and more than double the combined daily production of all the Norwegian oilfields during March this year. Ghawar was discovered in 1948 and began producing oil three years later.
Safanyia also lies in Saudi Arabia, but off the coast. If Ghawar is the king, then Safaniya is the queen with a production rate of 2 million barrels of oil per day.
Cantarel is also an offshore field. It lies in the Gulf of Mexico and, last year produced 1.7 Mbpd. However, its production is falling rapidly. In 2004 it produced 2.4 million barrels of oil per day. Now production lies at 1.1 million barrels.
Burgan is a group of oilfields in Kuwait that produce 1.3 million barrels per day.
Rumaila is an oilfield in the southern region of Iraq with a production of 1.2 Mbpd.