Re: Running on empty

[Massimo Portolani <mxp@xxxxxxxxxx>]

About this topic I have read an interesting book from Kenneth Deffeyes: 
The Hubbert Peak.
Hubbert calculated (successfully) when US oil production would peak, 
Deffeyes uses the same system
to calculate when world production will peak, and puts the date 
sometime between 2004 and 2008.
I found he has a website with some info: 
http://www.hubbertpeak.com/deffeyes/

I studied this issue a few years ago and it is interesting to see how a 
common lack of information
enables people to formulate wrong theories. As an example, some 
economists argued that
with the increase of oil price there will be an incentive to drill 
deeper and this will provide more oil.
Actually it appears that drilling deeper, due to higher heat, one finds 
gas and not oil.

The other commonly voiced answer is that 'we will find a way' or that 
'we will use hydrogen'.
Even Photo-Voltaic or Wind are used more to raise funds (Enron was 
active in Wind generation) than for the actual results.
They are discontinuous and can't be used to run factories; energy of 
that size can't be stored in accumulators.
Hydrogen does not exist and must be extracted with a chemical reaction, 
usually they make it stripping
Carbon from a Methan molecule (CH4) and producing Carbon Dioxide 
besides Hydrogen.

Unfortunately, developing and deploying new technologies takes a lot 
longer than saying it or writing about them
and this is the type of thing that should be done with a government 
committment and not left to the freewheeling market,
where everybody thinks short term and expect others to arrange the 
place for the party and clean the mess when
the party is over.

Massimo Portolani



On 15/mar/05, at 17:04, Louis Proyect wrote:

> Salon.com
> Running on empty
> The leading energy analysts who foretold Enron's demise have an 
> alarming new claim: The world's major oil companies are almost tapped 
> out.
> - - - - - - - - - - - -
> By Robert Bryce
>
> March 15, 2005  |  Four years ago, the analysts at John S. Herold Inc. 
> were the first to call bullshit on Enron. On Feb. 21, 2001, three 
> Herold analysts issued a report that said Enron's profit margins were 
> shriveling, the company had too few hard assets, and its stock price 
> was way too high. Less than ten months later, Enron filed for 
> bankruptcy.
>
> Today, the analysts at Herold -- a research-only firm that issues 
> valuations on several hundred publicly traded energy companies -- are 
> making predictions even bolder than their call on Enron. They have 
> begun estimating when each of the world's biggest energy companies 
> will peak in its ability to produce oil and gas. Herold's work shows 
> that the best minds in the energy industry are accepting the reality 
> that the globe is reaching (or has already reached) the limit of its 
> own ability to produce ever increasing amounts of oil.
>
> Many analysts have estimated when the earth will reach its peak oil 
> production. Others have done estimates on when individual countries 
> will hit their peaks. Herold is the first Wall Street firm to predict 
> when specific energy companies will hit their peaks.
>
> Since last fall, Herold has done peak estimates on about two dozen oil 
> companies. Herold believes that the French oil company, Total S.A., 
> will reach its peak production in 2007. Herold expects 2008 to be 
> critical, with Exxon Mobil Corp., ConocoPhillips Co., BP, Royal 
> Dutch/Shell Group, and the Italian producer, Eni S.p.A., all hitting 
> their peaks. In 2009, Herold expects ChevronTexaco Corp. to peak. In 
> Herold's view, each of the world's seven largest publicly traded oil 
> companies will begin seeing production declines within the next 48 
> months or so.
>
> Executive vice president Richard Gordon, who heads Herold's global 
> strategies team, says the firm's goal in doing peak-production 
> estimates for individual oil companies is simple: "If the dinosaurs 
> are going extinct, we are trying to figure out which ones are going to 
> go extinct the soonest."
>
> Herold's projections have enormous ramifications both for stockholders 
> in the major oil companies and for every energy consumer on the globe. 
> If Herold is correct, and the world's biggest oil companies cannot 
> increase their production in the coming years, then several things 
> appear certain:
>
> # Oil prices -- which are already at record levels -- will continue 
> rising as demand outstrips supply. In a few years, gasoline prices of 
> $2 per gallon could seem like a bargain.
> # State-owned oil companies like Mexico's Pemex, Venezuela's PDVSA 
> (Petroléos de Venezuela) and Saudi Arabia's Saudi Aramco may be unable 
> to increase their production enough to meet burgeoning global demand.
> # The producers who belong to the Organization of the Petroleum 
> Exporting Countries, and Saudi Arabia in particular, may have even 
> more leverage over the global oil market in the coming years.
> # The United States will be ever more reliant on oil imported from 
> countries filled with people who don't like George W. Bush or his 
> policies.
>
> While Herold's projections provide ammunition to the growing chorus of 
> analysts who believe peak oil is imminent, they are not being welcomed 
> by the oil companies. Last month, when I asked ChevronTexaco's 
> chairman and CEO, David J. O'Reilly, to respond to Herold's projection 
> that his company would reach its peak production in 2009, he replied 
> snappishly, "I'm not going to comment on that."
>
> A spokesman for Royal Dutch/Shell in London was similarly coy, saying 
> in an e-mail that the company had "no comment" on Herold's projection. 
> However, the company's spokesman, Simon Buerk, pointed to a September 
> 2004 report published by Shell that predicts the company will be 
> producing the equivalent of 4.5 million barrels of oil per day by 
> 2014, not the 4 million barrels per day that Herold foresees for that 
> time frame.
>
> Charley Maxwell, an analyst at Weeden & Co., a Connecticut brokerage, 
> says oil industry officials are loath to discuss Herold's projections 
> because doing so would "circumscribe their future prospects and the 
> future growth of their stock, and executives have no interest in doing 
> that since so much of their compensation is tied to their stock 
> options." Maxwell, one of the most respected stock pickers in the 
> energy business, believes the non-OPEC oil producers will hit their 
> peak oil production in the next five years. And he applauds Herold's 
> research, saying that no other reputable firm "has been willing to 
> make this type of prediction."
>
> Another energy industry veteran, John Olson, co-manager of Houston 
> Energy Partners, an energy hedge fund, agrees. Olson believes that 
> Herold's predictions about peak production are "very significant. It 
> is perhaps the first cannon ball over the bow of a big tanker."
>
> But Herold has its critics. Brian J. Jennings, the chief financial 
> officer of Oklahoma City's Devon Energy Corp., which Herold believes 
> will hit its peak in 2009, says that Herold's analysis is "a truncated 
> look at the company. It assumes that nothing we are going to do over 
> the next five years will increase our production." Jennings says Devon 
> expects to increase its oil production by 25 percent over the next 
> five years -- and that figure does not include fields that the company 
> is developing in the Gulf of Mexico.
>
> Of course, scientists, pundits and oil men have been predicting that 
> the world will run out of oil ever since the gusher blew at Spindletop 
> in Texas in 1901. Despite those predictions, the last century has been 
> one of unbroken increases in supply. Each year, the oil industry has 
> produced more oil than it did the year before. Today, the industry is 
> producing about 83 million barrels of oil per day. New oil fields in 
> the deep-water Gulf of Mexico, in the Caspian Sea and in Saudi Arabia 
> will soon begin pumping oil onto the global market. Plus, huge 
> deposits of oil are available in the Canadian tar sands and American 
> oil shale.
>
> But turning tar sands and shale into motor fuel is a very expensive 
> proposition. And those new, unconventional oil sources may be 
> insufficient to replace the decline in production from existing 
> fields, which deplete by about 6 percent per year. Further, they may 
> be too small to quench the demand from the developing world -- China 
> in particular. Last month, at a conference in Houston, Zhu Yu, the 
> president of China's Sinopec Economics and Development Research 
> Institute, said that between January and September of 2004, motor fuel 
> use in his country soared by 20 percent. Yu also predicted that 
> China's oil consumption will double over the next 15 years to more 
> than 10 million barrels of oil per day. Meanwhile, the Energy 
> Information Administration expects India's oil consumption to increase 
> by nearly 30 percent over the next five years.
>
> The oil industry has plenty of other reasons to be nervous. The royal 
> rulers of Saudi Arabia, the world's biggest producer, appear 
> vulnerable to terrorist attacks and civil unrest. The Saudi 
> government's biggest enemy, Osama bin Laden, has focused his ire on 
> both the Saudi royals and the oil infrastructure in the Persian Gulf. 
> And his loyalists are eager to attack both of those targets.
>
> In Iraq, insurgents are continually attacking that country's oil 
> infrastructure -- thereby crippling the war-torn nation's economy and 
> its future prospects. In Venezuela, which has the biggest oil deposits 
> in the Western hemisphere, president Hugo Chavez has threatened to cut 
> off the flow of oil to the United States if the Bush administration 
> continues its efforts to undermine his government. In Russia, 
> president Vladimir Putin's brazen, state-sponsored theft of Yukos, one 
> of that country's biggest oil companies -- and his jailing of the 
> company's CEO, Mikhail Khordokovsky -- is likely to slow investment in 
> Russian oil fields for years.
>
> Furthermore, spare oil-production capacity has largely disappeared. 
> Oil producers are running their wells at maximum capacity. Indonesia, 
> a member of OPEC, cannot meet its OPEC quota of 1.4 million barrels 
> per day. In February, Indonesia was able to produce only 942,000 
> barrels per day, its lowest level of production in 34 years. And last 
> week, Algeria's energy minister, Chakib Khelil, said that OPEC "does 
> not have the production capacity to increase its quotas."
>
> All of these factors are sending oil prices to record highs. Monday's 
> NYMEX closing price for light sweet crude was $54.95 per barrel. Last 
> week, the Department of Energy issued a report saying that it expects 
> prices to stay near or above $50 per barrel for the rest of this year. 
> That's a big change for an agency that has always been conservative in 
> its price projects. At about this same time last year, the agency was 
> predicting that oil would cost about $29 per barrel throughout 2005.
>
> Whatever price projections are used, it's increasingly clear that the 
> era of cheap oil is over and that oil companies are having a harder 
> time finding new oil to replace the oil they're pumping. In short, it 
> appears that the late M. King Hubbert, a geophysicist who worked for 
> Shell in Houston, is being proved right. In the 1950s, Hubbert used 
> mathematical models to predict that American oil production would peak 
> in the early 1970s. That's exactly what happened. Now, Hubbert's 
> theories are being tested on a global scale.
>
> Herold's owner and CEO, Art Smith, is a believer in Hubbert's work. 
> Smith and his fellow analysts at Herold have been building their peak 
> production databases since 1996. About 10 months ago, Herold began 
> publishing what it calls "strategic evaluations" of specific 
> companies, which include graphics showing when that company will reach 
> its peak production. Herold does not do geologic analysis. Instead, 
> its analysts mine the company's filings with the Securities and 
> Exchange Commission. It also looks at the oil properties that the 
> company has acquired or sold, along with new projects being drilled, 
> and older oil fields in the company's portfolio. "We look at this 
> data, put it into a financial model, and start asking questions," says 
> Herold analyst Gordon.
>
> Herold isn't the only Wall Street firm considering the issue of peak 
> oil. In early December, Deutsche Bank issued a report that predicted 
> global oil production will peak in 2014. The Deutsche Bank report also 
> stresses political instability and China's surging demand. Those 
> factors, Deutsche Bank believes, "could trigger a shortage shock 
> leading to a price crisis."
>
> And while many analysts in Houston are convinced a peak in global 
> production is in the offing, there are others who believe that today's 
> high prices will trigger a surge in new oil production. David Pursell, 
> a partner at Pickering Energy Partners, a Houston brokerage, says with 
> oil at $50 per barrel, "a whole lot of oil fields that used to be 
> woefully uneconomic suddenly become profitable and that means that any 
> peak projections get delayed." Although Pursell is not ready to agree 
> with Herold's projections about individual energy companies, he -- 
> along with virtually everyone else in the oil industry -- agrees that 
> the era of cheap energy is over and that America must begin adapting 
> to the new geopolitical realities that come with that fact. Alas, it 
> appears the Bush administration hasn't made that same transition.
>
> Last week, President Bush gave a speech on energy policy in Columbus, 
> Ohio, in which he encouraged Congress to pass an energy bill. Once 
> again, he touted his plan to drill for oil in the Arctic National 
> Wildlife Refuge, a move he said would "eventually reduce our 
> dependence on foreign oil by up to a million barrels of oil a day." 
> The key word here is "eventually." Even if approvals for drilling ANWR 
> were granted immediately, the first oil from the refuge would not 
> reach the continental United States for years. Furthermore, as the New 
> York Times reported last month, it appears that the major oil 
> companies may have cooled in their desire to drill in the refuge. 
> During his speech, Bush also talked about efficiency measures that 
> could save homeowners electricity. But during his 4,600-word, 
> 35-minute-long speech, Bush uttered the words "hybrid vehicle" exactly 
> one time.
>
> It's astonishing that Bush, the former Texas oil man, still doesn't 
> understand the fundamental problem of America's imported oil 
> addiction. Nor does he appear to grasp the threat that is posed by the 
> possibility of peak oil.
>
> The majority of the oil that the United States imports from places 
> like Saudi Arabia and Venezuela is used as motor fuel in automobiles. 
> Yet the president conflated the idea that burning more coal and 
> building more nuclear power plants will somehow allow America to 
> reduce its oil imports. In his speech, Bush refused to discuss the 
> obvious: We cannot cut our oil imports (read: gasoline addiction) 
> without dramatic changes to our auto fleet. At some point, the United 
> States will have to force the automakers to build more efficient 
> automobiles. And a key part of that efficiency changeover will mean 
> replacing increasing numbers of America's 200 million cars and trucks 
> with hybrid vehicles.
>
> Even some of Washington's most hawkish neoconservatives are embracing 
> the idea of high-mileage hybrid vehicles. Former CIA director James 
> Woolsey, a key backer of the war in Iraq, is driving a Toyota Prius. 
> Woolsey, along with neocons like Frank Gaffney have begun preaching 
> the Greens' gospel of energy efficiency. The neocons haven't joined 
> the Sierra Club. Instead, they're arguing that energy conservation is 
> simply smart strategy when dealing with the Muslim extremists who 
> reside in the oil-rich countries of the Persian Gulf. But so far, the 
> neocons haven't been able to get Bush's ear.
>
> Remarkably, when it comes to thinking about peak oil and what it means 
> for the future of America, Wall Street analysts and neocons are taking 
> the lead, while the former oil man from Midland keeps his head up his 
> tailpipe.
>
> --
>
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