Two years wait

PARIS (ResourceInvestor.com) -- ‘Peak oil’ has well and truly grabbed the oil agenda if latest figures and pronouncements are anything to go by. Whether major oil companies, state or private, like it or not, peak oil cannot be ignored. The subject, ridiculed just three years ago, now sits centre stage.

When Lord Browne, head of BP [NYSE:BP; LSE:BP], spoke to a dinner at the Energy Institute in London, he was forced to confront the theory head on.

“We’re at a point of great change in this industry,” said Lord Browne. “Demand is growing, but we have to meet that demand in different ways from different sources.

It is impossible to predict the future, except to say that it won’t look like the past.”

One thing that may not look like the past is the way major oil companies replace their reserves. Or rather do not replace their reserves.

Only Exxon Mobil [NYSE:XOM] and Conoco Phillips [NYSE:COP] managed to replace their reserves without buying out other companies or fields in 2005. Even BP appear to have failed to replace their oil pumped last year, although final figures are not yet out.

Other companies like Chevron [NYSE:CVX] came in at 175% of reserve replacement. A stunning figure until you realise that Chevron bought Unocal. If it was not for the controversial buy out they would have failed to get anywhere near 100% of reserve replacement, closer to 80% was more likely.

The same can be said of companies like Amerada Hess [NYSE:AHC] and Marathon [NYSE:MRO], whose return to Libya boosted their reserve replacement over the 100% mark. The same cannot be said of a company like Repsol [NYSE:REP]. It is rumoured that the downgrade of their reserves by 25% in January might be added to when they produce final figures for 2005 expected in March - possibly by another 2.5%.

As Resource Investor has reported, there are some unusual figures concerning OPEC production as well. According to latest figures from the Middle East Economic Survey (MEES). Iran’s OPEC quota is 4.1 million barrels per day (mbpd). After producing 3.89 mbpd in December the MEES figures for January saw that production at 3.65 mbpd.

Both Platts and MEES have now reported declining OPEC production for the last three months. The production figures were 29.73 mb in December, declining to 29.27 mb in January.

Of course this does not mean peak oil theory is correct. It could easily be that OPEC countries see the market well supplied in terms of inventories. US NYMEX crude inventories are some 26% up on this time last year at 22.4 mb for example. This would allow some countries to rest tiring fields or individual wells that have been running at full tilt since last summer.

On the other hand the opacity of OPEC supply and reserve figures mean these statistics will be instantly seized upon. That very opacity is now being openly challenged by men like Lord Browne.

“The reality is that we have a serious problem,” admitted Browne.

“Unless the geologists succeed in finding new and so far unidentified provinces…we will all be dependent on supplies from just three areas – West Africa, Russia and, most important of all, the five states around the Persian Gulf, led by Iran, Iraq and Saudi Arabia."

http://www.resourceinvestor.com/pebble.asp?relid=17479

There is so much discussion going on about Peak Oil (new term = "petronoia" from Syriana, apparently), it makes your head spin. What's the truth? I think most experts agree that we're in sort of a grey zone of statistics right now, that nothing is truly clear and the numbers could be interpreted in many ways. They also agree that things will look much more clear in a few years. Can we wait another couple of years to get some more clarity on the issues? Not too long to wait in the scheme of things I guess. Especially considering there are those experts who think these concepts should have been seriously tabled back in the Carter days. Yeesh. I guess if the ice caps and glaciers are irreversibly melting and the polar bears are dying and we're still pushing out babies and cars like there's no limit to what we can consume and destroy in the name of capitalism, what's two years?