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Page added on November 20, 2016
How Big Oil Loses Even Without Peak Demand
The first rule of making projections out to 2040 is to recognize the fact that you’ll almost certainly be wrong. After all, think about doing the same thing back in 1992. Would you have predicted this?
Somehow, I doubt it; most people didn’t see it coming 24 days ago.
But when you’re the International Energy Agency, you have to go out on a limb and peer a quarter-century ahead anyway. The latest World Energy Outlook, published on Tuesday, weighs in at a magisterial 667 pages of detailed analysis and scenarios. I’m going to focus specifically on one aspect: oil supply and demand.
One scenario is called “New Policies” — essentially taking governments at their word in terms of commitments to limit greenhouse gas emissions. It isn’t an all-out decarbonization scenario, nor one where no further political efforts happen. It sits between these two and therefore represents something like a middle way. Here’s how oil demand is projected to go under this one:
The first thing to notice is that, in contrast to recent comments from the likes of Royal Dutch Shell Plc’s CFO, these numbers don’t show a peak in oil demand anytime soon.
The second thing to notice, though, is that 11 million barrels a day extra spread over 25 years equates to average annual growth of 440,000 barrels a year. That’s roughly a third of the pace over the past 25 years, when demand increased by roughly 1.1 million barrels a day, on average, each year.
So this wouldn’t be a scenario of peak demand, just very slow-growing demand. Now match it up with the IEA’s projections for where that oil would come from. In the chart below, the various sources that aren’t controlled by OPEC are split into their major types:
Big Oil’s best prospects are conventional fields outside of OPEC, which aren’t subject to any quotas (such as they are), generally enjoy better fiscal terms, and can be booked easily as reserves. Big Oil also figures prominently in Canada’s sandpit. Everything else there — OPEC, ‘Tight oil’ such as shale resources, and natural gas liquids — are generally less lucrative or not an area where the oil majors have displayed a sustained competitive advantage. Add up projected conventional non-OPEC and oil sands supply and it looks like this:
Remember also that a big part of that shrinking pool of oil is in Russia, another tricky jurisdiction. Factor it out and the pool shrinks from 25.4 million barrels a day in 2015 to 20.5 million.
The need to offset natural decline in existing oilfields means that, even under this scenario, the majors would have opportunities to invest. But in order not to be reduced to a residual source of supply and to promise growth to underpin dividends, they would have to cut more deals with OPEC hosts and demonstrate that, despite the record to date, they can out-compete their independent E&P rivals in shale. They would also have to wring as much value as they can from natural-gas liquids — as well as, of course, natural gas itself.
Funnily enough, Shell, run by a CEO with a long history in liquefied natural gas and petrochemicals, is positioning itself for that world (and maybe one where oil demand peaks sooner). Exxon Mobil Corp. also has a big downstream and chemicals business and has bet big on U.S. shale gas and, although stymied for now, Russia. Chevron Corp., meanwhile, has invested heavily in LNG and talks up its shale oil assets.
These are all valid responses (although gas faces risks of its own from coal and renewable energy). The wider point is that this particular possible world looks much harsher for the majors than the past 25 years — even with oil demand still projected to go up.
hellenicshippingnews.com
18 Comments on "How Big Oil Loses Even Without Peak Demand"
rockman on Sun, 20th Nov 2016 8:22 pm
Big Oil once had Seven Sisters. Now there are fewer. Eventually there will be even fewer. Eventually there will be 0ne Sister. And eventually no Big Oil. And eventually maybe some second cousins.
But likely the same fate for Big Auto, Big Airline, Big Builder, Big Retail, Big Farm, etc, etc.
And the perhaps the worst potential aspect: the end of Big Population. And perhaps the eventual soul survivor: Big Army. OTOH with all the other Bigs gone perhaps just a bunch of Little Army.
dave thompson on Mon, 21st Nov 2016 1:53 am
Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak If we If we say it enough times it will be true! demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand Peak demand
Lucifer on Mon, 21st Nov 2016 2:11 am
WTF is that all about Dave? A few repeats would of got the message across.
dave thompson on Mon, 21st Nov 2016 2:55 am
Got your attention right mr devil? This peak demand BS has pushed me over the edge of better judgment. We are in a cascading downward spiral of depletion, I am tired of this obfuscating dialog of deception. Peak demand is nothing more then a main stream narrative devoted to depletion denial and pushing the uneducated into a space of, oh well, it will all work out ………………some how with the magic of the markets, my ass.
Cloggie on Mon, 21st Nov 2016 3:05 am
How Big Oil Loses Even Without Peak Demand
Big Oil has a big future, even without oil. They recognize a pipe when they see one and they know how to drill. That’s enough.
Enter geothermal energy with enormous potential for space heating.
Shell CEO Ben van Beurden has staved off an internal renewable energy coup yet, but at some point the Rubicon will be crossed and oil will be abandoned.
https://www.businessinsider.nl/shell-baas-van-beuren-wijst-radicale-transformatie-naar-duurzaam-af-641258/
Meanwhile CEO Shell Netherlands Marjan van Loon wants both wind and gas:
https://www.nrc.nl/nieuws/2016/05/21/de-keuze-is-niet-wind-of-gas-shell-wil-allebei-1619478-a550625
Shell meanwhile really yearning for higher oil prices. Something has got to give.
https://fd.nl/ondernemen/1161764/stijging-olieprijs-cruciaal-voor-shell
dave thompson on Mon, 21st Nov 2016 3:19 am
Dream on cloggie industrial civ lives and dies by cheap fossil fuels. No oil no coal no nat gas ???? game over.
Cloggie on Mon, 21st Nov 2016 3:25 am
The Shell coup plotters:
https://follow-this.org/
Founder Mark van Baal:
https://follow-this.org/nieuws/follow-this-in-the-guardian/
Above I mentioned pipes and drilling but forgot to add off-shore technology.
Shell bidding for one of the largest offshore wind parks (700 MW) in the world near Borssele, Zeeland province:
http://www.offshorewind.biz/2016/07/06/borssele-12-worlds-cheapest-offshore-wind-farm/
…competing with Danish Dong:
Map:
https://static.fd.nl/media/images/06/82/98/inline/1280×0/high/graphic-windmolenpark.png?v=30
Cloggie on Mon, 21st Nov 2016 3:28 am
Dream on cloggie industrial civ lives and dies by cheap fossil fuels. No oil no coal no nat gas ???? game over.
Loser attitude. There will be life after oil.
dave thompson on Mon, 21st Nov 2016 3:50 am
That would be nihilist attitude cloggie.
makati1 on Mon, 21st Nov 2016 4:04 am
Cloggie has the same techie wet dreams that many younger dreamers have. That the world is going to go on similar to today forever … because … tech ALWAYS has the answer. Except when it doesn’t, which is 99% of the time. LOL
Cloggie on Mon, 21st Nov 2016 4:12 am
https://www.youtube.com/watch?v=w9XBPeCb0Ew
(Dutch, English subs)
Shell CEO van Beurden fried by shareholders earlier this year about the direction of the company.
Van Beurden clearly would prefer to continue to “pump up as much as he can”. Shareholders vote 78-20% for Shell to become renewable energy company.
Didn’t happen, not yet.
Cloggie on Mon, 21st Nov 2016 4:27 am
Cloggie has the same techie wet dreams that many younger dreamers have. That the world is going to go on similar to today forever … because … tech ALWAYS has the answer. Except when it doesn’t, which is 99% of the time. LOL
Makati took the elevator back to his apartment, switched on the light, made himself a cup of coffee with his Walmart coffee machine, had a warm shower, had a dry shave, called his children in the US to say that he is a little homesick, switched on the computer and use the global IT network to broadcast the message that technology doesn’t work 99% of the time.
Right.
Now some hard-hitting facts:
http://tinyurl.com/jbftekf
Annual solar radiation dwarfs the total reserves in oil, gas, coal and uranium.
There is no real energy problem that can’t be solved and the solution is renewable energy technology. We have to reinvent ourselves and it is admittedly a daunting task, but potentially it can be done.
Whining on the internet that we are all going to die isn’t very helpful.
peakyeast on Mon, 21st Nov 2016 5:53 am
Cloggie: Its called the Danish Dong 🙂
Cloggie on Mon, 21st Nov 2016 6:37 am
Ding-Dong.
Thought it was Chinese.
So wrong, ding-dong.
makati1 on Mon, 21st Nov 2016 6:55 am
Cloggie, No Walmart here. They cannot compete. lol. Filipino prices are too low, for the same items. No need to pay shipping to America when the factories for that Walmart junk are just across the South China Sea. We do have a Walter Mart Mall, owned by a Filipino-Chinese family.
I have never been homesick in the last 50 years. I see my family annually and when I cannot, well, that is life. They can come and see me if they want. But they have their own lives so I do not expect visits. As long as the telephones work, I can talk to them. That is no different than the fact that they live in several wide spread states and I would not see them anyway.
As for the warm shower? Why? it is always warm here so a cool shower is the norm. The water is normally about 25C-30C as the stainless steel tanks on the roof are not insulated. Saves electric. Today was 32C and sunny. Typical for most of the year.
I did not say tech did not work. I said it’s answer is not correct 99% of the time. It usually causes more damage than it fixes. Name one techie thing that is NOT destroying the very life support systems we need to survive …
peakyeast on Mon, 21st Nov 2016 8:20 am
@cloggie: You may be right… After all DONG was sold to the masters of corruption: Goldman-Sachs. They may well sell it to the chinese once they have torn away the useful bits, plundered whatever infrastructure, materials, equipment, and written up the value at the same time – you know – those things those selfsacrificing clever bankpeople/meth-addicts do to provide real tangible value to the citizens of the world.
In just a couple of years earned 50% on top of their investment. And the plundering has only just begun.
rockman on Mon, 21st Nov 2016 9:04 am
peaky – “And the plundering has only just begun.” Which is why I hypothesized the last Big “corporations” way down the road might be Big Army.
peakyeast on Mon, 21st Nov 2016 10:07 am
@Rock: Yeah It seems there are no limits to the changes that is happening towards the worst possible society.
btw. i see a number fell out.. It wasnt 50% it was 150% on top.