Okay, so here's part of a new article I read today that freaks the hell out of me. Can anyone comment on its accuracy? Holy crap!
Oil Shortages After 2007 by Dale Allen Pfeiffer -- FTW Energy Editor
It appears that the year 2007 will be important for oil as well as natural gas. A new study published in Petroleum Review suggests that production might not be able to keep up with demand by 2007. The study is a survey of mega projects (those with reserves of over 500 million barrels (Mb)) and the potential to produce over 100,000 barrels per day (Gbpd) of oil). Mega projects are important not only because they provide the bulk of world oil production, but also because they have a better net energy profile than smaller projects, and they provide a more substantial profit than smaller projects. Bear in mind that the planet consumes a billion barrels of oil (or two mega fields) every eleven and one half days.
The discovery rate for mega projects has dwindled to almost nothing. This can be seen in the data for the last few years. In 2000, there were 16 discoveries of over 500 Mb; in 2001 there were only 8 new discoveries, and in 2002 there were only 3 such discoveries. From first discovery to first production generally takes about 6 years. If the new project can make use of existing infrastructure, then the start up time might be cut to 4 years.
This past year (2003), 7 new mega projects were brought on stream. 2004 expects to see another 11 projects start producing. 2005 will be the peak year for bringing new projects on stream, with 18 new projects expected to be brought on stream in that year. In 2006, the pace drops back to 11 new projects. But in 2007 there are only 3 new projects scheduled to begin production, followed by 3 more in 2008. There are no new projects on track for 2009 or 2010. And any new mega project sanctioned now could not possibly come on stream any sooner than 2008.
The study points out that currently about a third of the world's oil production comes from declining fields, with a likely overall decline rate of about 4%. As a result, global production capacity is contracting by over 1 million barrels per day (Mbpd) each year. New production is the only thing offsetting this decline.
By 2007, production capacity will have declined by 3-4mn b/d. Yet this decline will be offset by 8mn b/d of new capacity drawn from the many new projects expected to come on stream over the next few years. This leaves a surplus of 4mn b/d in spare capacity. Yet global demand is growing by over 1 Mbpd each year. So 3 years of demand growth will reduce our spare capacity to 1mn b/d by the start of 2007. As very little new capacity is set to come on stream in 2007, that remaining 1 Mbpd spare capacity will likely disappear before 2008.
The upshot of all this is that the oil supply appears robust until 2007. With so much new production coming on stream, there may even be periods of price weakness. However, it is likely that we will begin suffering oil shortages after 2007, especially if anything happens to disrupt a portion of the production. If new projects are not sanctioned to start up by 2008, then by the end of that year we are likely to see shortages without any cause other than rising demand.
AIGHHHHH!!! The full article is on the FromTheWilderness.com website or can be found on my other blog.