Oil orthodoxies

Two recent oil conferences presented such widely differing views that any delegate attending the two might justifiably feel conflicted. The Offshore Northern Seas (ONS) conference in Stavanger had a distinct green tinge. One speaker claimed that the weather over the last 20 years is proof of climate destabilization (OGJ, Sept. 7, 1998, p. 33). A speaker at the Centre for Global Energy Studies' (CGES) World Oil Prices conference in London Sept. 8-9 also referred to the weather, but his view

Sept. 21, 1998

3 min read

David Knott
London
[email protected]

Two recent oil conferences presented such widely differing views that any delegate attending the two might justifiably feel conflicted.

The Offshore Northern Seas (ONS) conference in Stavanger had a distinct green tinge. One speaker claimed that the weather over the last 20 years is proof of climate destabilization (OGJ, Sept. 7, 1998, p. 33).

A speaker at the Centre for Global Energy Studies' (CGES) World Oil Prices conference in London Sept. 8-9 also referred to the weather, but his view was diametrically opposed (see related story, this page).

Mark Rodekohr, director of the energy information department at the U.S. Department of Energy, said that oil prices are expected to remain low in the near term, and only a cold winter could change the outlook.

"However," said Rodekohr, "we haven't had a cold winter for the last few years. There is no reason to think global warming is a factor in this-that's probably a minority view."

This brought a murmur of assent from the CGES conference audience, but I pictured Rodekohr making the same comment to the ONS crowd, only to be chased from the theater by a lynch mob wearing Viking helmets.

Reserves debate

The rapid pace of change in the oil industry means that a view can appear controversial to one sector and at the same time acceptable to another.

A later speaker at the CGES conference was Colin Campbell, associate consultant at Petroconsultants SA, Geneva. He said that his own views about inadequacies in reserves estimation have only recently been accepted.

Campbell has argued down the years that the way companies and governments report reserves is misleading, and it means that worldwide production will peak earlier than most economists expect (OGJ, Dec. 29, 1997, p. 33).

"I found," said Campbell, "that 90% of today's production comes from fields more than 20 years old and 70% from fields more than 30 years old. These are well-known old fields with little technical possibility for huge late revisions."

Early peak

Campbell said that the rate of oil discovery peaked in the mid-1960s, from which he extrapolated that the world's ultimate reserves are 1.8 trillion bbl of oil.

"In global terms," said Campbell, "the simplest model shows that peak production will come when half the ultimate reserves, namely 900 billion bbl, has been produced. On present trends, that will be around 2001."

Because of this, Campbell expects there will be a worldwide oil price shock around 2000, followed by the onset of a chronic physical shortage of oil about 10 years later.

Campbell claimed that the International Energy Agency (IEA), Paris, now accepts his view and predicts a non-swing production peak in 2000, a global production peak in 2013, and a shortfall of 17 million b/d by 2020.

"I also note," said Campbell, "that the chief executive of Agip SpA recently published his belief that world peak production will be between 2000 and 2005. Agip is to be complimented on its honesty."

Campbell's case suggests that the sustainable development approach promoted at ONS could also become oil industry orthodoxy. Then denial of global warming, even debate about reserves, will have become irrelevant.