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["WF Smith" <WarrenSmith AT PalmettoBuilders.net>]

> As you say, we've passed peak oil. The transition would be a
> whole lot less
> gruesome if we started to adjust now rather than when gasoline cost $10 a
> gallon, but they pretend that we can just keep drilling.

I don't know who said that in this thread, but they were mistaken. This
article is lifted from The Economist, 4/05 Issue. It's a subscription site,
so I don't think posting a link would work. It's long, but not hard to
understand:

[quote]
The United States Geological Survey did a
comprehensive study in 2000 and concluded that such a
peak was at least two decades off. The IEA broadly
concurs, arguing that oil supplies will not become
constrained until after 2030, provided the necessary
investments are made. However, some analysts disagree
sharply.
All found?

In essence, the pessimists say that there is a fixed
amount of oil in the ground to be found, and that
mankind has found it already. According to Jim Meyer
of the Oil Depletion Analysis Centre, a British
think-tank, “Discovery clearly peaked in the 1960s. We
are out of North Seas.” He argues that annual oil
consumption has exceeded new discoveries since the
1980s, indicating that the world is running down its
stock of “found” oil, and reckons that 18 major
oil-producing countries, currently making up about 30%
of world output, are now past their peak.

Given that oil companies have poked and prodded the
entire Earth (save Antarctica) for over a century,
goes the argument, there cannot be any more
“super-giant” fields such as Saudi Arabia's Ghawar,
which alone produces 5m bpd. Mr Campbell has neatly
summarised this view of the problem: “Understanding
depletion is simple. Think of an Irish pub. The glass
starts full and ends empty. There are only so many
more drinks to closing time. It's the same with oil.
We have to find the bar before we can drink what's in
it.”

But this argument is wrong both on a philosophical and
a practical level. The philosophical problem, says
Michael Lynch of EnergySEER, a consultancy, is that
the pessimists treat the level of recoverable oil
resources as fixed—like the amount of beer in that
mug. In fact, expert estimates on the ultimate
recoverable resource base have consistently grown over
the past few decades, even though the world has been
guzzling oil as if there was no tomorrow (see chart
5).

Peter Odell of Rotterdam's Erasmus University points
out that “since 1971, over 1,500 billion barrels have
been added to reserves. Over the same 35-year period,
under 800 billion barrels were consumed. One can argue
for a world which has been ‘running into oil' rather
than ‘out of it'.”

What makes the estimates go up continuously is a
combination of economics and innovation. The IEA
explains the process this way: “Reserves are
constantly revised in line with new discoveries,
changes in prices and technological advances. These
revisions invariably add to the reserve base.”

A few decades ago, the average oil recovery rate from
reservoirs was 20%; thanks to remarkable advances in
technology, this has risen to about 35% today. But
despite this improvement, two-thirds of the oil known
to exist in reservoirs is still abandoned as
uneconomic, leaving room for tomorrow's discoveries or
innovations to lift recovery rates and magically push
the global Hubbert's peak even further towards the
horizon. Pundits had predicted that fields in the
British North Sea would reach their maximum output by
1990. In fact, they have only just peaked.

Dozens of similar examples from around the world added
up to defy Mr Campbell's prediction of a global
Hubbert's peak by now, which plainly has not
materialised. Indeed, even the legendary Hubbert did
not get it quite right. His forecast for the American
production ignored the vast quantities of oil that lie
under the deep waters of the Gulf of Mexico. That may
seem an unfair critique, as he had no way of knowing
about the wave of offshore drilling technologies that
have become available in the past decade. But that is
the point: today's pundits cannot foresee tomorrow's
innovations.

Petro-optimists say the future for oil is bright. Mr
Odell argues in a recent book, “Why Carbon Fuels Will
Dominate the 21st Century's Global Energy Economy”,
that conventional oil will not peak until nearly
mid-century, and that unconventional oil resources
such as Canada's tar sands will peak only at the end
of this century. Morris Adelman of the Massachusetts
Institute of Technology has even argued that the
“amount of oil available to the market over the next
25 to 50 years is for all intents and purposes
infinite.”
A new age of discovery

But there is a more practical fallacy embedded in the
gloomy forecasts too. “I challenge the idea that the
era of discovery is over in oil,” says Total's Mr de
Margerie. Thanks to the cold war and other political
constraints on western investment, much of the world
has yet to be explored with the aid of the latest
technologies.

Russia is a good example. When it opened up to private
investment under Mr Yeltsin, it saw a huge inflow of
modern technology and management talent, causing a
dramatic leap in production—which has now been put in
jeopardy by Mr Putin's crackdown on the sector.

Similarly, other parts of the world are still
“under-rigged” and under-examined. According to Mr Fu,
CNOOC's chairman, “our offshore prospects are just
beginning. A promising area the size of two North Seas
has yet to be explored.” When India recently
liberalised its oil-exploration sector, Britain's
Cairn struck oil in Rajasthan soon afterwards. V.K.
Sibal, India's director-general for hydrocarbons,
expects much more, “maybe even a super-giant deep
offshore somewhere near the waters off Myanmar.”

The unexplored potential in the Middle East remains
vast. Pete Stark of IHS Energy, a leading consultancy
on exploration, says that Iraq has over 130 undrilled
prospects, and expects its proven reserves to rise
sharply over time. Neighbouring Saudi Arabia has about
260 billion barrels of proven oil reserves today. Mr
Naimi, the oil minister, is confident that current and
future technologies will help lift that figure by 100
billion barrels in the next few decades, and points to
an unexplored region on the Saudi-Iraqi border which
alone is the size of California.

Total's Mr de Margerie points to frontiers that will
be opened up by technology: “There may not be any more
glamorous Ghawar fields, at least onshore, but there
is tremendous opportunity if we look at ‘deep
horizons'.” He believes that there are large deposits
10,000 metres (32,800 feet) or more underground. The
snag is that they are usually under very high pressure
or very hot, and may be extremely acidic. But as
technology improves, he thinks, “these very strange
hydrocarbons” will become economic.
The industry is exploring under water at depths that
were unimaginable a decade or two ago

Already, the industry is exploring under water at
depths that were unimaginable a decade or two ago. In
the Gulf of Mexico and elsewhere, oil rigs now float
atop 3,000 metres (10,000 feet) of water. These
marvels of engineering are stuffed with the latest in
robotics, electronic sensors and satellite equipment.
Using fancy “multilateral” wells that twist and turn
in all directions, they can hit giant underwater oil
pockets miles away from the rig.

In short, there are lots of frontiers left. Yet even
if there is plenty of oil still available under the
ground, getting it to market will pose huge problems.
It will take lots of innovations, as well as courage
and capital, to move it to where it is needed.
[/quote]
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