[GHung]

Are energy companies putting all of their resources into scraping the bottom of the barrel to remain profitable, short term? How long can this continue before things go south? What then?

$this->bbcode_second_pass_quote('', '[')b]THE ENERGY CLIFF APPROACHES: World Oil & Gas Discoveries Continue To Decline

As the world continues to burn energy like there is no tomorrow, global oil and gas discoveries fell to another low in 2017. And to make matters worse, world oil investment has dropped 45% from its peak in 2014. If the world oil industry doesn’t increase its capital expenditures significantly, we are going to hit the Energy Cliff much sooner than later.

According to Rystad Energy, total global conventional oil and gas discoveries fell to a low of 6.7 billion barrels of oil equivalent (Boe). To arrive at a Boe, Rystad Energy converts natural gas to a barrel of oil equivalent. In 2012, the world discovered 30 billion Boe of oil and gas versus the 6.7 billion Boe last year:



In the article, All-time low for discovered resources in 2017, Rystad reports, it stated the following:
$this->bbcode_second_pass_quote('', '
')“We haven’t seen anything like this since the 1940s,” says Sonia Mladá Passos, senior analyst at Rystad Energy. “The discovered volumes averaged at ~550 MMboe per month. The most worrisome is the fact that the reserve replacement ratio in the current year reached only 11% (for oil and gas combined) – compared to over 50% in 2012.” According to Rystad’s analysis, 2006 was the last year when reserve replacement ratio reached 100%.

[rockdoc123]

Analyses like this can be misleading if you don't distinguish between the different definitions of reserves and resources.
Here Rystad mixes the two together (assuming they have an audience that understands the difference) with discovered resources and produced reserves. What that would intuitively mean is 1P (proven reserves) is decreasing at a higher rate that resources are being added. What is misleading here is that each year (according to the BP 2018 statistical report) the worlds Proven reserves have increased. What that means is there is a pool of 2P, 3P and resources previously discovered that through additional drilling or other work have been elevated to Proven (1P) status.
The BP analysis addresses the future via a calculation of reserve life index but that too is based on the current level of Proven (1P) reserves. So when they say the world has an average reserve life index of say 50 years what that means is if there were no movements from 2P, 3P and resources categories to 1P (Proven) category it would take 50 years at current production rates for all of the Proven reserves to have been produced. Of course, that isn't the case as BP's numbers illustrate Proven reserves are increasing. And the large resource base that sits in North American shales and oil sands is downplayed simply because current recovery factors are so low. The significance of this is important. If, as an example, the recovery factor on LTO in shales was to increase by 10% that would add the equivalent of all the new oil discovered in 2017 (according to the Rystad estimates)

As well it goes without saying that at least one reason for a poor showing in new field discoveries is lack of exploration expenditure in total and the decreased amount of that expenditure that has gone to actual drilling. You certainly can't hope to find something if you aren't looking for it. WoodMackenzie predicts that with the increase in price global exploration will gradually pick up. Certainly, most of the big things have been discovered (although there is still room for deep and ultradeep water discoveries in various place) but there will be large discoveries much like what was found in Guyana, Mexico and Senegal in 2017. When you consider that there is still a lot of movement left to happen between reserve categories then the picture becomes much less dismal than portrayed by the Rystad Energy Chart.

[Plantagenet]

$this->bbcode_second_pass_quote('GHung', '
')
$this->bbcode_second_pass_quote('', '[')b]THE ENERGY CLIFF APPROACHES: World Oil & Gas Discoveries Continue To Decline

...In the article, All-time low for discovered resources in 2017, Rystad reports, it stated the following:

“We haven’t seen anything like this since the 1940s,” says Sonia Mladá Passos, senior analyst at Rystad Energy. “The discovered volumes averaged at ~550 MMboe per month. The most worrisome is the fact that the reserve replacement ratio in the current year reached only 11% (for oil and gas combined) – compared to over 50% in 2012.” According to Rystad’s analysis, 2006 was the last year when reserve replacement ratio reached 100%.

[Outcast_Searcher]

$this->bbcode_second_pass_quote('Plantagenet', '
')The lack of new oil discoveries is a very real concern. You might expect the jump in oil prices to produce an equivalent jump in the amount of spending on new exploration, but there just aren't a whole lot of super-giant or even giant oil fields out there waiting to be discovered, and the oil companies know that. They aren't going to spend huge amounts of money searching for oil fields in areas that they've already explored, and pretty much everywhere has already been explored.
Cheers!

[Plantagenet]

$this->bbcode_second_pass_quote('Outcast_Searcher', '')$this->bbcode_second_pass_quote('Plantagenet', '
')The lack of new oil discoveries is a very real concern. You might expect the jump in oil prices to produce an equivalent jump in the amount of spending on new exploration, but there just aren't a whole lot of super-giant or even giant oil fields out there waiting to be discovered, and the oil companies know that. They aren't going to spend huge amounts of money searching for oil fields in areas that they've already explored, and pretty much everywhere has already been explored.
Cheers!

[Outcast_Searcher]

$this->bbcode_second_pass_quote('Plantagenet', '
')Do you think the oil companies aren't exploring and aren't making huge new discoveries because they forgot to do it? Do you think the oil companies really wanted to explore all these hot prospects but just couldn't find the money to explore? Its time to face facts----The oil companies aren't exploring because there isn't anywhere left to explore. The earth needs to discover a new Saudi Arabia---and there aren't any more out there to find.

Where exactly do you suggest they go look to make these new oil discoveries that you are so confident are out there?
Cheers!

[GHung]

$this->bbcode_second_pass_quote('Plantagenet', '')$this->bbcode_second_pass_quote('Outcast_Searcher', '')$this->bbcode_second_pass_quote('Plantagenet', '
')The lack of new oil discoveries is a very real concern. You might expect the jump in oil prices to produce an equivalent jump in the amount of spending on new exploration, but there just aren't a whole lot of super-giant or even giant oil fields out there waiting to be discovered, and the oil companies know that. They aren't going to spend huge amounts of money searching for oil fields in areas that they've already explored, and pretty much everywhere has already been explored.
Cheers!

[rockdoc123]

$this->bbcode_second_pass_quote('', 'D')o you think the oil companies aren't exploring and aren't making huge new discoveries because they forgot to do it? Do you think the oil companies really wanted to explore all these hot prospects but just couldn't find the money to explore? Its time to face facts----The oil companies aren't exploring because there isn't anywhere left to explore.

[Plantagenet]

$this->bbcode_second_pass_quote('Outcast_Searcher', '
')I think that low oil prices (until quite recently) over the past 4 years have greatly suppressed exploration for oil. After all, that's been all over the news.

[rockdoc123]

$this->bbcode_second_pass_quote('', 'F')ace facts---there hasn't been more then 1-2 new giant conventional oil field discoveries in the last 20 years

[Plantagenet]

$this->bbcode_second_pass_quote('', '
')some examples of giant fields discovered in the past 20 years:

Tupi/Lula (Brazil) 2006 – 7.5 billion bbls recoverable
Jupiter (Brazil) 2008 = 1 – 2 billion bbls recoverable
Liza (offshore Guyana) 2016 ~1.4 billion bbls
Payara (offshore Guyana) 2-17 ~1 billion bbls
Zama (offshore Mexico) 2017 ~1-2 billion bbls
Kashagan (Kazakhstan) 2000 – 7-9 billion bbls
Azadagen (Iran) 1999 6 – 9 billion bbls
Thunder Horse (GOM) 1999 1 – 1.5 billion bbls
Shaikan Sheikh Adi (Kurdistan) 2009 – 4 – 6 billion bbls
Dalia (Angola) 1997 = 1 billion bbls
Agbami (Nigeria) 1998 = 1 billion bbls
Vaca Muerte (Argentina) 2011 900 million bbls
Keathley Canyon (GOM) 2011 – 700 MMboe
Jubilee (Ghana) 2007 –1-3 billion bbls

[KaiserJeep]

You are all pretending that the demand for oil is inelastic. It simply is not. As oil supplies get scarce, the price of finished petroleum fuels and goods goes higher, curbing demand. Then as prices increase, oil exploration increases and eventually a few years later, there is another glut of oil.

This has been happening for decades. Note that I am not making an argument that the oil supply is not finite. It very definately is, and we may have passed the oil peak in the recent past. Which means that the prices of petroleum products will on the average rise over the coming decades. Which in turn will encourage more exploration, the exploitation of non-conventional oil sources, and the creation of new extraction and refining tech.

Decades from now, everybody will be feeling the pinch of ever more expensive oil. There simply is no energy cliff involved.

[KaiserJeep]

It's not a "cliff". It takes decades for these trends to worsen. Decades of oil remain.

[KaiserJeep]

YOU do the math. There are about 2.5 Billion humans, more or less, that depend upon mechanized, petroleum-fuelled agriculture to make the difference between malnutrition and famine. In the very near future, those people simply cannot afford to eat, and they will die. It won't be pretty, it won't be quick, and you will SEE the images on the network and the nightly news.

Meanwhile, the typical Middle Class citizen of the USA/Mexico/Canada will grumble about the cost of gasoline, and be inconvenienced by such prices.

As I have said many times, TEOTWAWKI is a process, not an event. The refugee crisis is the leading edge, and throughout the next few years, we will finish the wall, export less and import more petroleum, and experience a crisis in lifestyle as everthing we consume costs more due to expensive energy.

The elasticity in demand that I am talking about is the death of a third of the World's population in the next three decades. Africa, parts of Asia, the Middle East, and South/Central America will all slowly become worse hellholes than they are already.

In the USA, our Middle Class lifestyles will be intact, our politics more contentious than ever before, and the income inequality in the USA greater than it ever has been. The 0.1% will be richer than ever, and they will be joined by another 9.9%:
https://www.theatlantic.com/magazine/archive/2018/06/the-birth-of-a-new-american-aristocracy/559130/
...but don't worry, Pete. You have a place in the 9.9%.


But ...... I weary of repeating it ..... there is no cliff.