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Thursday, May 26, 2005

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When oil wells run dry

Adam Porter

We use more oil than we find, and if producers are fixing their figures the end could be closer than thought.

PREDICTING THE end of the age of oil can be a sticky business. The Association for the Study of Peak Oil and Gas (Aspo), a collection of industry figures, politicians and academics, this week held its annual meeting at the Gulbenkian Museum in Lisbon.

From quiet beginnings three years ago, Aspo is no longer just "bubbling under" in being taken seriously.

Delegates to the meeting had to squeeze past no fewer than 10 documentary crews, a nest of television cameras and a phalanx of reporters just to grab their seats in the packed auditorium.

Rather than talking about when oil could "run out," Aspo prefers to predict that global production may be at, or approaching, its height. The world is using more oil than it finds, and discoveries of oil fields peaked in the 1960s. Despite technological advances since then, new field discoveries are at an all-time low.

This, said delegates to the meeting, has led to the current lack of any "cushion"' between supply and demand, and to the consequent high prices. The outcome for the world, if Aspo is correct, is catastrophic.

Central to the organisation is the work of Colin Campbell, a geologist and former executive vice-president of oil giant Total. Making the meeting's keynote speech, Mr. Campbell talked about the "dawn of the end of the age of oil" and the "end of economics."

Underpinning all of Mr. Campbell's, and Aspo's, work is the lack of transparency in the world's oil data. Mr. Campbell drew attention to the way in which members of the Organisation of Petroleum Exporting Countries (OPEC) "revised" their reserve figures in the 1980s, and said that it is incredible that this "flawed data" is still being used today.

He highlighted the example of Kuwait, which scrubbed its previous figures in 1985. Overnight, its reserves went from 64 billion barrels to 92 billion barrels. As OPEC allows production quotas tied to stated reserves, this allowed Kuwait to pump more oil and immediately make a lot more money.

Mr. Campbell showed how, two years later, the other countries in OPEC, outflanked by Kuwait's sudden action, followed suit. The United Arab Emirates went from 31 billion barrels to 92 billion barrels. "Then came Iran," said Mr. Campbell. It declared its reserves had increased, but went one better, going from 47 billion barrels to 93 billion barrels. "And what of Iraq?" added Mr. Campbell. "Saddam [Hussein], as we all know, had some pretty strong views on things, so he decided to come in at a round 100." Its previously stated reserves were 47 billion barrels.

Some 18 to 20 years later, these numbers remain unchanged.

This despite the United Arab Emirates, for instance, pumping millions of barrels every week since the day it flipped its figures.

Mr. Campbell asserts that OPEC members, and others such as Russia, are stating the total amount ever found, not the amount left for us to use.

But such claims are not the preserve only of Aspo. This year, the International Energy Agency, the International Monetary Fund and G7 members all demanded that OPEC, and other producer nations, open their fields to audit.

Without knowing how much oil is left to pump, decisions about any energy transitions — the move away from oil as a predominant fuel — remain impossible. Saudi Arabia, a major player in global oil production, in 1988 also increased its stated reserves — from 170 billion barrels to 258 billion barrels overnight. —

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