Register

Peak Oil is You


Donate Bitcoins ;-) or Paypal :-)


Page added on June 26, 2012

Bookmark and Share

New study forecasts sharp increase in world oil production capacity, and risk of price collapse

Oil production capacity is surging in the United States and several other countries at such a fast pace that global oil output capacity is likely to grow by nearly 20 percent by 2020, which could prompt a plunge or even a collapse in oil prices, according to a new study by a researcher at the Harvard Kennedy School.

The findings by Leonardo Maugeri, a former oil industry executive who is now a fellow in the Geopolitics of Energy Project in the Kennedy School’s Belfer Center for Science and International Affairs, are based on an original field-by-field analysis of the world’s major oil formations and exploration projects.

Contrary to some predictions that world oil production has peaked or will soon do so, Maugeri projects that output should grow from the current 93 million barrels per day to 110 million barrels per day by 2020, the biggest jump in any decade since the 1980s. What’s more, this increase represents less than 40 percent of the new oil production under development globally: more than 60 percent of the new production will likely reach the market after 2020.

Maugeri’s analysis finds that the gross additional production from current exploration and development projects in the world could produce an additional 49 million barrels per day by 2020, an increase equivalent to more than half the world’s current 93 million bpd. After adjusting that gross output increase for political and technical risk factors as well as the offsetting depletion rates of current fields, the analysis projects the net increase by 2020 to be about 17.5 bpd.

His study attributes the expected growth in oil output largely to a combination of high oil prices and new technologies such as hydraulic fracturing that are opening up vast new areas and allowing extraction of “unconventional” oil such as tight oil, oil shale, tar sands and ultra-heavy oil. These increases are projected to be greatest in the United States, Canada, Venezuela and Brazil. Maugeri also predicts a major increase in Iraq’s oil output as it regains stability, which will add new production in the Persian Gulf region — potentially destabilizing OPEC’s ability to manage output and prices.

The combination of new production in the Western Hemisphere and the still growing production in other parts of the world could lead to a sharp drop in oil prices, Maugeri finds, which if steep enough could lead oil companies to cut back on investment and ultimately slow down oil supplies. But if oil prices remain above about $70 per barrel, sufficient investment will occur to sustain continued growth in production, possibly leading to a stable phenomenon of oil overproduction after 2015.

“Leonardo’s conclusions are not only startling, but his paper provides a transparent explanation for how he reaches them – something lacking in many studies,” said Meghan L. O’Sullivan, the Jeane Kirkpatrick Professor of the Practice of International Affairs at the Kennedy School and director of the Geopolitics of Energy Project. “His findings have major implications for geopolitics, suggesting important shifts in how countries interact and wield influence.”

Maugeri was senior executive vice president of the Eni oil company in his native Italy, and has authored books and articles suggesting that oil will remain more plentiful than many predict. His new research tests that hypothesis with in-depth analysis of reserves and production levels of all the major oil fields across the globe. He also assesses the impact of evolving technologies that open up new fields and allow more efficient extraction in existing fields.

The most dramatic increases involve the exploitation of unconventional oils in the United States, Maugeri says. For example, the Bakken and Three Forks fields in North Dakota and Montana could become the equivalent of a Persian Gulf-producing country within the United States. The Bakken formation’s output has grown from a few barrels in 2006 to 530,000 a day in December 2011.

While the surge in production in the Western Hemisphere in coming years will in effect leave the region self-sufficient in oil, the global nature of the market makes that all but meaningless except in psychological terms, Maugeri argues. He adds that the industry will need to make major investments to keep oil production environmentally safe to avoid threatening the new bonanza.

###

To view the Paper, click here.

To view the Policy Brief, click here.

To view the Video Interview, click here.

Harvard Kennedy School 

 



13 Comments on "New study forecasts sharp increase in world oil production capacity, and risk of price collapse"

  1. dissident on Tue, 26th Jun 2012 11:53 pm 

    What rubbish. Shale oil? This is childish nonsense. There is not one single commercial shale oil plant that will come onstream by 2020. He also forgot to update his figures about Canadian tar sands: they are not going to reach 5 million barrels per day by 2020. Also, fracking is not for oil but for natural gas so this article is totally confused in its cornie bleating.

  2. SilentRunning on Wed, 27th Jun 2012 1:44 am 

    Any risk of “price collapse” will be short lived indeed. Oil prices will not stay below the cost of production for any length of, unless you wish to entertain the notion that oil companies will suddenly become charities.

    Oil is steadily becoming harder and more expensive to find, refine and process. Shale Oil is a perfect example. Rather than pointing to plentiful oil, it is a desperation measure. Same with tar sands.

  3. DMyers on Wed, 27th Jun 2012 2:09 am 

    Is this guy a scripted ‘bot, or what? He admits that he inserts his own special assumptions into his analysis. That indicates to me that his analysis is going to find what it wants to find.

    To me, the total breakdown, fatal flaw, and complete failure of the entire presentation was his statement that the Northwestern shale oil (Bakken et. al.) had gone from nothing to one million barrels a day. The implication, this is really something! From nothing. Wow! So, like I’m sitting in my yard, and there’s no oil. Then my buddy comes over and we drive a stake to throw horseshoes. And when we do some oil squirts out. Later, we pack the backyard with oil recovery technology, and I buy a couple of adjacent lots that are in foreclosure because no one wants to live next to me. Eventually, I get it up to one million barrels a day. Just like that. I had nothing, and now I have one million barrels a day. For me, that’s quite an accomplishment. But what does one million barrels mean on the scale we’re talking here, great strides in global oil production?

    From this perspective, we could be celebrating a thousand barrels a day. “Sheeyut, we didn’t have nuthing yesterday, and now we got a thousand barreels a day!” I mean, even ten barrels a day would be ten we don’t have now.

    But, to sum it up, the volumes that are necessary to maintain the American lifestyle are so more than a million barrels a day, that to suggest that a million is significant is proof of a complete disconnect from the very subject we’re on.

  4. BillT on Wed, 27th Jun 2012 3:22 am 

    Harvard, the Old Boys Club of the 1%. What can you expect but more and more bull shit to be shipped out as they try to convince the sheeple that the world is not collapsing around them because of the greed of the 1% and peak oil. It will become a tsunami in the years to come as the pain becomes too hard to ignore. Wait and see.

  5. MrEnergyCzar on Wed, 27th Jun 2012 3:34 am 

    How can Harvard be affiliated with this article….

    MrEnergyCzar

  6. Ham on Wed, 27th Jun 2012 3:45 am 

    Haha pure unadulterated cobblers. We being bombarded by misinformation on an epic scale. Shale ponzi is going to backfire. “The bigger the lie the easier it is for the public to believe it” Adolf Hitler.

  7. Harquebus on Wed, 27th Jun 2012 3:57 am 

    $70 is about right. The airlines can’t handle any higher but, the oil producing countries need a lot more than that just to sustain their own economies.
    I haven’t seen it yet, I will but, I expect to see what others have stated here. BS.

  8. DMyers on Wed, 27th Jun 2012 4:11 am 

    MrEnergyCzar

    Wake up and pay attention! Bill is speaking of Harvard, the Old Boys Club of 1%. He’s talking about those who are behind you and and exploiting their position of rear entry. How explicit does this have to be made? This guy is their shill, their mouthpiece, in my own words, their ‘bot.

  9. BillT on Wed, 27th Jun 2012 5:13 am 

    If you want a list of the Harvard “Old Boys Club” go to this site and see how many of Harvard’s graduates now run the world. You will be surprised how many are in the positions of power in the US and many other countries. This is NOT chance.
    http://en.wikipedia.org/wiki/List_of_Harvard_University_people

    I quick counted hundreds of people I know from the news as persons of power and wealth, the 1%. Harvard is where the rich go to make connections that allow them to control the rest of us.

  10. Norm Hill on Wed, 27th Jun 2012 8:19 am 

    Hooray! Unlimited new oil supplies! Now I can go buy an Escalade. and a Ford F-350.

  11. Pacman on Wed, 27th Jun 2012 9:01 am 

    On the remote possibility that this production growth proves even partially correct a price drop would be highly likely. What’s the betting that governments miss the small window of opportunity to refil the national strategic petroleum reserves before production stalls and prices rise again?

  12. BillT on Wed, 27th Jun 2012 12:36 pm 

    No bet, Pacman. They will refill it when oil is back to $150 per barrel. Gotta support those poor oil companies.

  13. shortonoil on Wed, 27th Jun 2012 4:21 pm 

    “New study forecasts sharp increase in world oil production capacity, and risk of price coll”

    In the early 2000’s the GM sales department made a prediction that small truck sales would grow by a very significant percentage during the ensuing years. Based on a computer generated “reference model” GM invested $billions in retooling for this expected avalanche of customer demand. It wasn’t many years later that the taxpayer was told by Washington that they would be baling out one of America’s icons. We’re still bailing!

    GM’s model did not include the crash of Lehman Bros, and the credit system. When credit disappeared for the average American, so did their pursuit of trucks. When the cost of oil production grows faster than the market price of oil, so will the oil industry’s pursuit of new reserves. Over the next decade production cost will increase by about $45/b more than its price will increase.

    The cost of producing oil has on average increased in energy and $ terms since the first barrel of oil ever produced was boiled down into lamp oil. Viscosity has increased, wells have gotten deeper, and most of all, water-cut has gotten greater. The Laws of Physics assures us that these will continue to increase. Those same Laws assure us that what the end consumer can – will pay, will not! This Harvard analyst has missed an important lesson of history; models are as substantial as the theory they are based upon. In this case, counting barrels is not a theory – its a activity!

    The Hill’s Group
    “A determination of world crude oil depletion”

Leave a Reply

Your email address will not be published. Required fields are marked *