A look at what’s happening to world crude oil production is disquieting. For example:
- The only country in the world with additional producing capacity is Saudi Arabia. However, the capacity of that country to increase its oil production meaningfully and to sustain it over the longer term must be viewed in the context of what appears to be faltering production in its aging “crown jewels,” including Ghawar, Abqaiq, and Safaniya that were discovered over 50 years ago.
- Domestic petroleum consumption in Iran is increasing as its crude oil production begins to falter.
- Given oil project lead times and the present turmoil, prospects for significantly increasing production in Iraq over prewar levels are poor. Iraq’s giant oil fields, Kirkuk and Rumalia, are 80 and 50 years old respectively and are showing their age.
- North Sea and Norwegian offshore production is declining.
- Oil production in Mexico, an important US supplier, is declining alarmingly—down 174,000 b/d or 5.3% in 2007.
- Political unrest in Venezuela and Nigeria does not bode well for dependable, stable oil supplies from those regions.
- It’s becoming increasingly rare that a major new oil field is discovered.
- Oil producers continue to do what they can to stem the decline of existing fields, estimated at 4.5%/year by Cambridge Energy Research Associates.
Meanwhile, world crude oil demand continues to rise. Clearly, the era of cheap oil is over, and this will moderate the growth in demand. Still, the assessment of John B. Hess, chairman and chief executive of Hess Corp., appears spot on. “Given the long lead times of at least 5-10 years from discovery to production, an oil crisis is coming and sooner than most people think. Unfortunately, we are behaving in ways that we do not know there is a serious problem (OGJ, Feb. 25, 2008, p. 27).”
Even in the unlikely event that Mr. Hess is dead wrong and there turns out to be oil aplenty (albeit costly) for years to come, there is still no reason to squander a resource that is finite and depleting. The US as the world’s profligate energy consumer should take the lead in energy conservation and efficient energy utilization, in developing alternative energy sources, and in showing others how to do it. Therein lie immense market opportunities.
Thomas Wyman
Palo Alto, Calif.
