|
|
|
Exploration & Production: The Oil & Gas Review 2005 - Issue 2 -
|
|
|
|
|
Order high-quality repints of any articles on this website
|
|
|
|
|
|
Of all the issues that people confront in the 21st century, resource depletion promises to have the greatest impact on economic and cultural destiny. Of the world’s dwindling resources, none will have a greater impact on the future than the decline of oil and natural gas.
The economic impact of oil and natural gas depletion is not a future event. It is happening now. Days of surplus are coming to an end. Although the impending decline of oil production is perhaps 20 years ahead of a similar decline in the production of natural gas, upward pricing pressure on the oil market will drive a similar increase in natural gas energy costs.
World oil and natural gas markets are in transition. Historically, consumer demand usually established the parameters of consumption and pricing but, in this new era, consumption will be limited by producer capacity. Oil and natural gas prices will be highly volatile because of the inevitable mismatch between demand and supply.
Exporting countries will be in a position to control the price and availability of increasingly scarce commodities. As a result, corporate behaviour, government action, cultural stability, economics, legal agreements, geography, weather, transportation, military diplomacy and the always potent combination of religion and politics are now more important than geology in developing resource production forecasts. Call these the derivative factors of doing business on a global scale. Each one could disrupt the flow of oil and natural gas. As a result, proven or identified reserves are less important than accessible reserves – i.e. the oil and natural gas that can actually be found, produced and transported without disruption.
Cultural conflict is a barrier to oil exploration and production (E&P). Most of the world’s existing conventional oil is controlled by political regimes that are vulnerable to religious fanaticism. Islamic extremists obviously understand that oil is a weapon of war. They have the motivation, the means and the opportunity to disrupt the flow of oil. This takes us to Saudi Arabia – and Iraq. Future supplies of oil – i.e. enough oil to meet the growing world demand – teeter on the political stability of these two countries.
Vulnerability of the World Economy
National selfish best interest will also play an important role in natural gas E&P. There is a growing realisation that a nation’s oil and natural gas reserves should be retained for internal consumption. Canada, for example, will eventually set limits on its oil and natural gas exports to the US. In addition, nations that conserve their natural gas and oil reserves will be in a position to exert political power over those that have none of their own – a fact that virtually guarantees that Western Europe will be forced to move politically closer to Russia.
Of immediate concern, of course, is oil depletion. The question is how much oil there is left. There are those who claim that the Earth contains up to 10 trillion barrels (Tbl) of oil. The question is where it is, and how much of this windfall that is technically and economically feasible to produce. For example, it will be practical to develop only a small fraction of the world’s enormous deposits of oil sands and shales. Deep-sea and arctic deposits are both difficult and expensive to reach. Declining discovery rates appear to indicate that most of the easy-to-exploit pools of oil have already been found.
Upper Limits of the Reserves That Can be Produced
Better information is needed, but is not available. Nations tend to treat resource statistics as classified information, which leaves the rest of the world with currently available reserve data. Total world resources of conventional oil and natural gas liquids appear to be just over 1.4Tbl. If estimated producible nonconventional oil resources are added, there are approximately 2.3Tbl of economically viable oil left on the planet.
|
|
|
|
|
|
|
Ronald R Cooke has more than
33 years of professional marketing
and business development
experience. He has an extensive
background in market research,
industry analysis and strategic
planning. Mr Cookeâ??s prior
experience includes technology
assessment, operations analysis and
the evaluation of corporate
financial performance. An economist
by training, he has pursued the
study of cultural economics since
1969. Mr Cookeâ??s book Oil, Jihad
and Destiny provides an assessment
of world oil production,
characterises the economic
devastation of oil depletion and
suggests solutions to the emerging
energy crisis. He is a member of
the Association for the Study of
Peak Oil & Gas â?? USA (ASPO-USA).
|
|
|
|
Download PDF
