From: Glenn Morton (email@example.com)
Date: Sat Jun 14 2003 - 17:05:49 EDT
For several years, I have noted that the world's energy will soon be running
short. I have said that the world will soon peak in oil production. I have
waited eagerly for a publication by BP called the 2003 Statistical Review of
World Energy. This is a much watched document in the oil industry because
BP, as one of the largest oil companies, does a great job of watching the
world markets for energy of all types. It has the history of reserves,
production, price and other trade information. I expected the UK production
to be down, but the surprise for me was Norway's production. It was down by
3%. Given that Norway's governmental agency, the Norwegian Petroleum
Directorate, has predicted that they would begin their decline between 2003
and 2005, the decline beginning in 2002 is interesting. If this is the
beginning of the production decline for Norway, it means that a basin which
today produces 10% of the world's oil is now in decline. The UK has
declined as follows
1999---137 million tonnes
2000---126 million tonnes
2001---118 million tonnes
2002---115 million tonnes
2003---110 million tonnes est. --down 1.6 million tonnes in the first 4
months over the first 4 of 2002.
In the same period, Norway has produced
1999---149 million tonnes
2000---160 million tonnes
2001---162 million tonnes
2002---157 million tonnes
This new data shows that the North Sea as a whole has declined 8 million
tonnes over the last year. And Norway expects more decline soon. See
One should not confuse production with reserves. Reserves are up,
production is only slightly up worldwide. Reserves are like the amount of
money in your bank account. Production is like the amount they let you
withdraw every day. If you have a billion dollars in your bank, but can
only withdraw 1 dollar per day, you are not rich.
One other thing which is relatively interesting about the BP Statistical
review. China's consumption went up 5.8%. According to the Oil and Gas
Journal, world demand has increased 2.6% in 2002, which is way ahead of the
average 1.4% over the past 10 years. see
Most of this demand increase is due to China. This much demand increase
will move the peak in global production towards the present making the
future problems sooner and worse.
This phenomenon is not limited to the North Sea. It is also likely that
within a couple of years or so, the Gulf of Mexico will begin its decline.
Chris Oynes, the director of the MMS gave the scenarios for the Gulf at the
Offshore Technology Conference in early May. I was there. What he said is
reported in the Houston Chronicle:
"In the high scenario, total oil output for the Gulf will grow from 1.7
million barrels per day this year to 2.05 million barrels in 2005 before
topping out at 2.14 million barrels in 2006." Nelson Antosh, "Keeping the
Gulf in Play," Houston Chronicle, May 6, 2003, p. 1B
"In the low scenario, oil production starts at 1.53 million barrels per day
in 2003 and tops out at 1.79 million barrels in 2006." Nelson Antosh,
"Keeping the Gulf in Play," Houston Chronicle, May 6, 2003, p. 6B
Gas is in worse shape.
"Natural gas, in the high scenario, drifts downward from 13.03 billion cubic
feet per day in 2003 to 12.51 12.51 billion cubic feet per day in 2007.
"In the low scenario, which assumes shallow-water declines
similar to the
past, the ooutput slips during each of the five years, starting with 11.98
billion cubic feet in 2003 and ending with 9.86 billion cubic feet per day
in 2007." Nelson Antosh, "Keeping the Gulf in Play," Houston Chronicle, May
6, 2003, p. 6b
In Alberta, Canada, a major supplier of gas to the US, the situation is
"Companies that have been operating for roughly the past 10
years in the
oil and gas producing areas of western Canada--mostely in Alberta---are
conceding that wells with rapidly declining production and rising operating
costs are no longer financially feasible.
"Among the companies pulling out are ConocoPhillips, Marathon Oil Co.,
Vintage Petroleum and Murphy Oil Corp.
"Natural gas wells in western Canada are typically shallow
easy to drill, but production declines rapidly, meaning operators have to
drill furiously in the area to replace reserves. The area has been the
largest oil and gas producing region of Canada for the past five decades.
"In 2002, companies drilled 18,000 wells in western Canada.
But even so,
natural gas production in the region is projected to be down by 4 percent
this year. The national Energy Board of Canada estimates initial production
from gas wells in the region is off by 45 percent compared with 1995
levels." Michael Davis, "The Cost of Maturity," Houston Chronicle, May 25,
2003, p. 1b.
18,000 wells and a decrease of production of 4% does not bode well for
natural gas prices in the US. This is a very bad sign for energy. Natural
gas storage in the US is at record low levels. And production is down 1.8%
in 2002 vs. 2001. Canada is also down 1.8% in 2002 vs. 2001
There is little that can replace oil. It is on the verge of declining on a
global basis. Those 3rd world countries who have not developed yet, are too
late. They will never see the 21st century.
What could change this bleak scenario? Genetic modification of algae to
create hydrogen could convert the world to a hydrogen economy. The creation
of a successful fusion reactor would also solve the problem. Barring these
technologies, I see nothing else on the horizon. Barring these solution,
this will be an ugly century.
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