PARIS (ResourceInvestor.com) -- For regular readers of this column, you will know we take a strong middle line on the subject of peak oil. We think it is like death: At some point it is going to arrive, rather unfortunately, and the consequences of it do not appear to be favourable. It is what we do before it arrives that makes the aftermath more bearable.
There are some very important areas in which peak oil advocates are generally correct in their assumptions. Take data transparency as the biggest. No one can call, plan or predict supply and demand with any certainty when the entire industry is guessing how much oil we have.
Of course measuring liquids, sands, shales or gasses that live deep underground is a very hard thing to do. It is not like counting up a warehouse full of packing containers. But when certain areas of the globe simply will not allow the counting of the figures by anyone independent, this opaqueness is a major spanner in the works.
There are other areas of the peak oil debate which are quite frankly, a joke. Assumptions and easy “predictions” about the human race dieing off are pretty nauseating. As if the authors of these tracts are some kind of soothsayers with an ability to predict the future. They would be laughable if they did not generate significant profits for certain people, too lazy to bother working in or understanding the energy industry.
But in the middle of the peak oil debate - the gray area - lie topics that are interesting and worth discussing but with possibly erroneous conclusions. One is the idea that there are very few major oil and gas projects to be brought on stream after a certain date in the future. It is a valid point to make that few projects are there to be assessed after, say, 2012. They just are not there.
On the one hand it is certainly true that there are very few projects currently lined up to come on after that time. But a counterweight to that argument is the philosophy of the companies that will be developing resources. This is true both in terms of the International Oil Companies (IOCs) and the National Oil Companies (NOCs).
The IOCs and the NOCs share one thing in common: They generally look fairly short-term in regards to their exploration and development budgets. Executives want to look after their jobs, and massive over-expenditure in development can be a waste of resources that can cause problems for nation states, especially those in the developing world.
IOCs work on the current corporate plane. Quarter to quarter they pump out figures that must – as much as possible – satisfy the banking industry, the IOCs major shareholders and the institutions to whom the corporations really answer. If those companies were to start spending huge volumes of cash on projects that would not see returns for 15 years, those executives would be out on their ears.
Similarly with the NOCs, but with the added problem that some of them are now mindful that they simply do not want their resources exploited at all. Qatar is the most obvious example. It looks set to bring on stream a huge volume of LNG and become one of the gas powerhouses of the world by 2012. But after that, nothing. Qatar wants Qatar’s gas for Qatar, not for the market. You can expect a similar stance from Venezuela and Saudi Arabia. Why add production? What for?
There will be major projects coming on stream after 2012. Currently the IOCs will not budget for them and the NOCs are too cautious to want to bother. To say they will not arrive is a mistake. Those projects will unfold in time. But whether they can replace current supplies affected even by a conservative decline rate is another matter entirely.
