by Leanan » Tue 03 Apr 2007, 11:44:22
This article is from the
Globe & Mail. It's subscription-only, but interesting. I'll quote just a few paragraphs, and hopefully avoid the wrath of the copyright police.
The article wonders why the price of oil has jumped so much, when nothing is really going on to cause it. No refinery fires, or pipeline problems, or hurricanes. The Middle East has political issues, but they always do. Could there be something else at work?
$this->bbcode_second_pass_quote('', ' ')For years, the "peak oil" crowd, along with no small number of analysts and a few top oil industry bosses, have watched the older fields' falling production rates and predicted scenarios ranging from, at best, gently but steadily rising prices to, at worst, a doubling of prices virtually overnight, leading to economic collapse. The oil optimists, among them Exxon (owner of Canada's Imperial Oil), say don't panic -- global production has not peaked and can still rise. New discoveries and technology will save the day.
After discussing the declining production of the North Sea, Prudhoe Bay, and Cantarell, the article moves on to the elephant in the room:
$this->bbcode_second_pass_quote('', 'T')he big question, of course, is Saudi Arabia, home to Ghawar, the world's largest oil field (the Burgan field in Kuwait is ranked second). According to various oil industry agencies, including the U.S. Energy Information Administration, there is little doubt Saudi oil production fell in 2006, with an 8-per-cent estimated decline. But there is considerable debate over whether the drop was the result of deliberate cutbacks to support the oil price or because Ghawar is past its prime and losing momentum.
Some leading oil analysts, including Henry Groppe of Groppe Long and Littell in Texas, think the cutbacks were indeed planned. This is saying something, because Mr. Groppe has been in the consulting business since 1955, is highly respected, and thinks the planet, though not necessarily Saudi Arabia itself, has reached peak oil output. Others think Saudi Arabia in general and Ghawar in particular are about to enter the geriatric ward. But what evidence? Saudi Aramco is state-owned and how much is being pumped from what fields is a secret. Counting tanker loadings from Saudi ports is probably as reliable as it gets.
But there are clues that all is not well in OPEC's swing producer. The first is anecdotal evidence that the Saudis are pumping more and more water into the reserves to maintain reservoir pressure. The second is a bit more scientific -- the number or oil drilling rigs in the country is soaring. In 2004, there were about 16. The number has since tripled -- more rigs, less production, at least less production in the past year or so. "It's indicative of a problem," one leading British oil executive says. "Everything the contract drillers have is getting sucked into Saudi Arabia."
Certainly, the rising oil prices in the absence of a genuine crisis suggests all is not right in Saudi Arabia. Oil analysts are raising price forecasts as demand and geopolitical tensions increase. If the skeptics are right about Saudi Arabia, the price could soar. The high-cost Alberta oil sands, with their enormous, long-term reserves, look appealing again.
