Key oil figures were distorted by US pressure, says whistleblower

[RuneX2]

The world is much closer to running out of oil than official estimates admit, according to a whistleblower at the International Energy Agency who claims it has been deliberately underplaying a looming shortage for fear of triggering panic buying.

The senior official claims the US has played an influential role in encouraging the watchdog to underplay the rate of decline from existing oil fields while overplaying the chances of finding new reserves.

The allegations raise serious questions about the accuracy of the organisation's latest World Energy Outlook on oil demand and supply to be published tomorrow – which is used by the British and many other governments to help guide their wider energy and climate change policies

Key oil figures were distorted by US pressure, says whistleblower

- John. What says you to this? More fear-mongering? For starters I'm very dubious about the term "whistleblower". Way to loaded.

[SmokeOnTheWater]

I wish I could say this was overblown, but I don't think it is. There was a guy called Colin Campbell (not the founder of Lotus btw) who gave a talk to leading British politicians about ten years ago about the looming oil crisis, but few people wanted to know.

Here's the text of the talk he gave. I don't know about you, but I find it persuasive;

http://www.oilcrisis.com/Campbell/commons.htm

[John]

You heard it here first.

There is going to be a large glut of oil after about the year 2015. I can see it coming. Here's why:

1. With the runup in oil prices of the past several years (which I expect to continue for a while - at least while the US dollar is low), everyone from the US all the way to China and India will be using oil as sparingly as possible. In India, for example, there is a big push going on to switch motor vehicles to natural gas. In neighboring Pakistan already half of all the cars on the road are powered by natural gas. And with an abundance of natural gas in the world, it is going to be cheaper than oil for quite some time.

2. The dirty little secret the peak oil theorists pay no attention to (or refuse to believe) is that there are huge supply additions coming online in the coming years, especially starting in about 5 years or so. Here is my list:

- Iraq - Production will increase from current 2+ million bpd to around 10 million barrels per day in 7-10 years. This is the 800 pound gorilla of new oil supply. Even if we take a pessimistic view and assume internal problems will slow down their rate of production growth, they are still going to be a huge supply addition.
- Angola - Production by 2015 will rise by at least 1.2 million bpd
- Saudi spare capacity is currently around 4 million barrels per day. With current production just over 8 million barrels/day this suggests their capacity is around 12 million bpd. Unlike a lot of people who dismiss Saudi claims of huge reserves, I do not doubt them. There is an interesting discussion with the former Saudi Aramco chief reservoir engineer here. It's best to read the whole interview, but here is a highlight:

I think this is probably a very very central pie chart and it warrants a few seconds of discussion. Essentially what I am showing you is the tank. How big is the tank? As we know it as of January 1, 2004. This is the oil initially in place with all the best technologies that the company has, with all its best knowledge at this time is 700 billion barrels.

[...]

We thought just as a matter of evaluation, 12 million [barrels/day] would be a good number. Here is 12 million. Again, it's just a scenario. If we ramp up by year 2014 to a production of 12 million, again, we believe we can sustain it very comfortably for 50 years and beyond.

We believe anything beyond 2054 is really going into the open speculative stage, so we thought even for what if game scenarios 50 years would be sufficient.

We looked at the reserves replacement requirements and again what we see is very very achievable. It's only 35 billion barrels which is 34 percent of probably and possible reserves. And please remember, this doesn't include any of the 150 billion barrels that I was mentioning.

Now we also look at the 12 million case, again, and again what we found out, you can do it basically after a similar ramp-up period, you can go up to 15 million and maintain it up to 2054. The only qualifier there would be that you would need 70 billion barrels of reserves replacement which again we feel is very very achievable.

Keep in mind this guy does not work for Aramco anymore (he is a consultant in Houston now) so there is no reason for him to toe any Saudi official line anymore.

Sub-total so far is 13.2 million bpd of additional capacity coming online in the next several years. And that's just from 3 nations. But we aren't finished.

- Brazil - In addition to Iraq, this is the other 800 pound gorilla of new supply. They currently produce about 2.5 million bpd (though that includes their ethanol production, actual crude oil is just over 2 million bpd). By 2020 they will be at 5.7 million bpd. As the link says, this figure does not include fields which have yet to be discovered. So that will almost certainly go up. I would not be surprised to see 7 or 8 million bpd by 2020.

Sub-total is now about 15.9 million bpd of new supply, not counting undiscovered Brazilian and Angolan fields.

- West African coast - not counting Nigeria. A series of discoveries off the coast of Ghana and, most recently, Sierra Leone, has just opened up a whole new exploration frontier. The big discovery in Ghana will start production next year, with a gradual ramp-up. Even conservative Exxon now wants in. I have no idea how much production will eventually come from this by 2020, but it is bound to be significant. I am also expecting large discoveries off the coast of Guinea (teaser) and almost certainly elsewhere. At any rate, let's be conservative and figure this will take a while to develop, contributing only 1 million bpd by 2020.

So we're now up to almost 17 million bpd in new supply by 2020.

I could add still more. There have recently been large discoveries in the Rift Valley of Uganda and the Congo, which will probably extend south to Tanzania and maybe east to Kenya. There will be sizable discoveries off the coast of the Falkland Islands (I would put money on that) and almost certainly the coast of Argentina. Much of this probably won't come onstream until after 2020, but some might come before. In addition, news out today says Canada's oil sands production will probably double by 2020 to 3.2 million bpd. There will be other sources of oil from Canada in addition to the oil sands, though the oil sands will probably be the dominating factor. I'm especially interested in a recent discovery off the coast of Newfoundland, but time will tell.

So, my WAG is that there is going to be about 20 million barrels/day of new supply coming onstream by around 2020. Maybe even 25 million (though that could be optimistic). Conservatively I would put it at 15 million.

Then there are declines.

Who is going to decline? The top candidate is Mexico, which is already in a steep decline due to the decline of their top field Cantarell. Pemex is making a heroic effort to develop their Chicontepec heavy oil field, but that is proving to be difficult. They are also (finally) just starting to explore some of their other offshore areas, including some deep water, but I think that will probably go slow and we may not see production until after 2020.

So, let's be extremely pessimistic and assume Mexican oil production falls to zero. They are currently producing about 3 million bpd.

So that brings us down to 17-22 million bpd in new supply by 2020.

Venezuela? This is a wild card which I have no idea how it is going to play out. Chavez is both a help and a hindrance to oil production in the nation. He has started to make a big effort to develop their Orinoco heavy oil belt, which is a huge area similar to Alberta's oil sands (though the stuff in Venezuela is of somewhat higher quality), but I don't have much of a sense of how this will go. So, let's compromise and assume their production will be flat.

Iran? Iran has made some sizable discoveries in the past few years (I could provide the info if anyone wants it) so I do not expect them to decline much. But perhaps they won't grow production much, either. So like Venezuela let's call this one a draw.

Russia? Believe it or not, right now Russia is out-producing the Saudis. Most analyses I've read think Russian production can stabilize for a while, at least to 2020. So once again let's call this a draw.

The UK and Norway? The North Sea has been declining for several years now. Norway currently produces about 2.4 million bpd and the UK produces about 1.5 million bpd. There is a possibility of discoveries on the UK's Atlantic continental shelf and maybe Norway's Arctic Sea, but let's be extremely pessimistic and assume production in both countries will decline to zero.

So we're now down to about 13-18 million bpd. But once again, this is assuming extremely pessimistic declines in the UK, Norway and Mexico, and does not include new discoveries in Brazil and Angola.

What about the US? There have been some big discoveries in the deepwater Gulf of Mexico which will almost certainly create large production volumes, and there are also new plays developing like this, of which there will be others. The latter ones will probably make up for declines in Alaska (which I'm not holding my breath for much new production from). I suspect the US will see a rise in production by 2020, but how much I'm not sure. So I'm going to call this one a draw, too.

Once you get beyond these nations you're not talking about much. The only big one I haven't mentioned is Nigeria. Their production has been declining for several years, but that is largely due to their militant attacks. They have recently made a truce with them, but we'll see if it lasts. I suspect the militants will tire of the effort after a while anyway. Ironically, these attacks and the resulting declines in production will have the effect of delaying any natural production declines, so I'm going to call this one a draw, too.

In summary, I can see at least 13 million bpd in net new supply by 2020, possibly more. And in an optimistic scenario, *considerably* more. But with a low dollar and speculators run amok to drive up the price, will we see *demand* increase by that much by then? I would be very surprised. This is why, contrary to what everyone else is saying, I'm going to predict a large glut of oil sometime after 2015.

You heard it here first.