Peak Oil and Peak Investment Constraining Production Levels

Although peak oil theories have been largely flawed by their main incapacity to take into account future technological developments and the effects of high crude oil prices, current production situation looks like a precursor of production plateaus.

Several peak oil protagonists have been lately hitting the headlines, showing their willingness to support the theory that production levels have peaked and doomsday scenarios have at last become a reality. The latter, based on current E&P technology, seismic technology and the fact that there are still vast portions of land unexplored – just think about Russia


More and more operators, oilfield services companies and national oil and gas moguls, such as Saudi Aramco, Nigerian National Petroleum Corporation or Kuwait Petroleum Corporation, are complaining that money currently cannot buy enough capacity to put in place the necessary projects. Some major multibillion projects are even put on hold, such as in Saudi Arabia, Kuwait, Qatar and Algeria, due to the fact that investors and operators, if willing to put in place an upstream or downstream project, see themselves confronted by project cost overruns reaching 150% to 200% of projected investments. In the end, the latter will put a major damper on further expansion.

The production factors are also being taken into account by the international energy consultancies, such as the IEA, the watchdog of the Organisation for Economic Co-operation and Development in Paris. The IEA has warned consumers and producers alike that high oil prices could be here to stay. The agency has warned that world oil demand will outpace supply this winter and that this gap will only widen if OPEC decides next month not to raise oil production. The only factor currently unable to be predicted – the impact of the coming winter – is currently putting a small damper on price levels.

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