Predicting the availability of oil and natural gas for 20 years is "fraught with difficulties," leaving the worldwide oil and natural gas industry with huge challenges, said Pierre Jungels, president of the London-based Institute of Petroleum.
He spoke during an opening address of an IP Week conference in London entitled, "Fueling the World Economy: Future Risks and Opportunities." Data on production and demand are subject to considerable uncertainty, he noted.
"Recent analysis by ExxonMobil (Corp.), for instance, indicates that over the next 10 years oil and gas demand will increase by around 2%/year whilst present fields in production will deplete at an average of 3–5%/year.
"The consequence is that the equivalent of half of present day production will have to be added over the period," Jungels said, noting that this would require $1 trillion of capital investment, 350,000 engineers and scientists, and technological advances "at least as great as those of the last 30 years."
Oil outlook
"Pretty heroic assumptions," he said, adding, "This is not going to happen if oil prices drop below $15/bbl, as some economists predict, since at these low prices the cash flow of the industry is just not sufficient."
Oil and gas production is by definition unsustainable in the long term, he added. The US Geological Survey spent 5 years estimating worldwide oil supply.
"The resulting report concluded that there was a 95% certainty that the total resource available when we started pumping oil was 2 trillion bbl with a 50:50 chance that there was 2.7 trillion bbl," he said.
"This includes the Middle East countries, where published reserves are probably optimistic for political reasons, but where significant new discoveries could be expected if the international oil companies were allowed entry to explore," Jungels said.
The world already has produced a little more than 1 trillion bbl, he said, and that "puts us about 10 years away from the famous King Hubbert peak, which occurs when about half of all possible reserves has been produced. The 2.7 trillion (bbl) high case of the USGS assumes significant increases of discoveries in the future, 'discoveries' meaning not only new fields but also additional recoveries of existing fields," he said.
M. King Hubbert has studied the exponential rise and fall of the rate at which a natural resource is consumed. He devised a graph of consumption rate vs. time known as the Hubbert curve (OGJ, Feb. 25, 2002, p. 40).
Natural gas outlook
Jungels said similar considerations apply to gas. "The data for gas are even softer than for oil, but a tentative King Hubbert peak would be in the 2020-30 range."
"In the near term, there is no shortage of oil and gas, although the rate of discovery worldwide has been declining since 1982, and more recently a majority of oil companies has had to revise downward their expectation of oil and gas production growth, citing technical, people, and weather issues. The reality is that the production targets were unrealistic and based on flawed statistics," he concluded.