Allen et al,

Here's a thought which popped to mind while reading Saudi's latest press release. It goes to Allen consideration of the actually timing of PO:


I believe the most recent press releases from Saudi Arabia can be taken as an admission the kingdom now believes they have reached Peak Oil.

Consider the KSA’s base positions:

1)The market is adequately supplied.
2) Much of the price run up is due to speculation.
3)The KSA has sufficient excess capacity to deliver significantly more oil to the market should there be a demand for it.

Now consider the new press releases from the KSA:

1)Khurais Field will come online next June at 1.2 million bopd.
2)The plan is to increase their current 11 million bopd capacity to 12.5 million bopd.
3)The cost to build this expanded deliverability is $10 billion.


If the KSA believes the market will require an additional 1.2 mm bopd next June they currently have, by their own admission, the capacity to meet the demand: 11 mm bopd – 9.6 mm bopd (current production rate) = 1.4 m bopd. Thus why spend $10 billion to add unneeded capacity. Granted in time the extra capacity will be required but according to their statements current deliverability is more than adequate to meet any demand increase in the immediate future.

You’re really left with only two conclusions (but please off any others that pop to mind):

1)The KSA didn’t really have a better use for the $10 billion right now and doesn’t mind the new production facilities sitting there idle. (and that’s a really bad idea: such equipment doesn't “age” very well if it’s not being utilized)
2)The KSA knows their true production capabilities and decline rates better than anyone else and projects a real demand for the additional NET capacity in a year.

Even if there’s a significant global recession (as there was in the early 80’s) and the price of oil drops 75% (like it did in 1986) to $40/bbl then the new production would still earn the KSA about $13 billion net (I’m guessing lifting costs of around $10/bbl).

Hmmm….recover the new costs with less than a year’s production even if the global economy slumps and consumption drops (like it did in the early 80’s). And then the KSA can open the wells up and grab a bigger chunk of market share just like they did when they drove oil down to $10/bbl in 1986.

Double Hmmm…..if a global recession puts PO off a few more years than the KSA is in a great position to capture more of the market and still make a handsome return. And if the world figures how out to prosper (or at least survive) with high oil prices then the KSA is in a great position to capture more of the market and make an more handsome return.

Damn...those Swiss economist are smart.

Good points. Either way they have a strangle hold on conventional oil production going forward as non-OPEC oil production is hardly growing at all, while we all know some older fields are already in steep decline.

Therefore, Saudi's real risk is energy conservation and a switch to alternatives that destroys 'potential' demand, and not the situation they faced a decade earlier when new non-OPEC supply came on-line.

And as the lowest cost producer, the price setter so to speak, they also control the economics of non-conventional oil production if future demand turns up weaker than expected. If not, then they share the total energy pie with non-conventional oil in a market with tight supply and growing demand.



That chart only goes up to 2006, and we all know what has happened to crude oil prices since then.



It is all about the money. A wealth transfer of unparalleled proportions. Or at least comparable with Spain's discovery of gold in the New World.

Spain's discovery of gold in the New World....a great analogy Mr. Bill. Works on quit a few levels when you ponder it.

Let us say you succeed tomorrow in convincing the whole world of peak oil imminence. How will this help anything?

(I mean, this web site becomes worth 20 billion dollars, but other than that?)

It's easy Nicky: smart people make better decisions than stupid people. And since many of the worst aspects of life are caused by bad decisions the benefit is obvious.

Bravo! Hit the nail right on the head! ; - ))

But wind-energy advocates say the lack of transmission lines has kept a lot of that power from being put to use and has hindered the building of more turbines.wind-energy

Welcome Jeorge! There are many including myself that feel that in the long-run the key to alternatives will be moving manufacturing and industry 'to' alternative sources of renewable power and not 'bringing' that energy to where people choose to live now (for whatever reason). That may be bad for the value of stranded assets already in place, but may be a post peak oil reality due to both transmission losses and infrastructure security in a world of scarcity.

That suggests a whole new wave of manufacturing in

...

Nebraska!!

That suggests a whole new wave of manufacturing in

...

Nebraska!!

I rather doubt that due to the developing water shortage which will only get worse as the Ogallala aquifer becomes further depleated.

More likely places IMO will include traditional and micro-hydro, tidal, wave, geothermal and offshore wind. Onshore wind in places with enough rainfall for dryland farming will also be a winner.

Of course if people are sensible enough to adopt conversion level fission reactors with full reprocessing the climate won't be so important where you live, the desert places will have HVAC just like they do now. Florida and California and AZ became havens for the retired age groups because of air conditioning, in the past people from 'up north' had no desire to live through a pheonix summer f they could avoid it by staying in the north. Thats the original source of all the 'snow birds' who migrate south in the winter and north in the summer, if it were not for cheap fossil fuels such a lifestyle would have never developed.

Sorry! >>> Oil Supply Set to Grow Through 2030 with No Peak Evident <<<

From the article:

Why bother mentioning that 60% of the existing fields examined were not experiencing production declines when the overall production decline is 4.5%? It smells of an attempt to sweeten the pill.That is hardly encouraging. Why don't they put that in context? We'd need to be finding far more than that to keep the balance sheet static.Utter hogwash. Only legislation, economic contraction or supply contraints (and hence higher prices) will decrease demand. Peak demand is just a vacuous soundbite for the hard of thinking.That's the get-out clause. "We've assumed huge amounts of investment in yet-to-be-developed fields and exploration to find the gargantuan yet-to-be-discovered fields, but if that's shown to be a load of horsecrap we can always blame it on the economic situation'.

Geez, I said no problem for 5 years in that Oil Discoveries thread and pstarr ripped on me bad.
This might make him lose it completely like he did a week ago.

I have to say with all that is going on anyone who thinks supply will actually grow until 2030 is smoking some very good dope.