When you compare these new projects (5 to 10 million barrels of potential production) in tandem with global demand and production decreases over the next three years (11 million barrels), we are headed for peak oil production. I think production could reach 87 million barrels per day, but 90 million is unlikely. Every project would have to go perfectly, or else Saudi Arabia would have to make up the difference.

It is difficult to find information about projected production for future projects. One source I found, Jeff Rubin, the Chief Economist at CIBC Word Markets, predicts new oil production to be 3.5 million barrels per cbd isolate canada day in 2006, 3 in 2007, and 3 in 2008. If you add these up, he is expecting 9.5 million barrels of increased production over the next three years. If his numbers are right, the key for reaching peak oil before 2009 will be the net depletion rate. If this rate stays close to 2% then peak oil will not occur until after 2008.

Another source I found was Oilcast #28 on OilCast.com. This audio file includes an interview with a PEMEX engineer. He has a few insightful comments. 1) Peak oil will be somewhere between 85 and 90 million barrels per day. 2) The Saudi’s are already producing at maximum capacity. 3) It is unlikely the Saudi’s will produce much more than what they are currently producing.

If new projects do not meet demand, that leaves Saudi Arabia to fill the void. The producer of last resort. They claim that they will be able to increase production 2 million barrels per day over the next three years. I have my doubts.

In 1978 (the last year Aramco was ran by International Oil companies such as BP), Aramco publicly released reserves on a field by field basis that totaled 110 billion barrels in proven reserves. In 1979, Aramco changed from foreign stewardship to Saudi Aramco (The Saudi Royal Family). In 1982, after the formation of OPEC, the Saudis increased their reserves to 150 billion barrels, although they had not discovered any new fields. Today, they claim 260 billion barrels in proven reserves, yet have never provided any documentation to substantiate their claims.

What we do know about Saudi reserves is that no oil has been found in any significant quantities since 1978 (90% of their production is coming from old fields). In addition, we know that they have produced more than 75 billion barrels since 1978. So, if we are to believe their numbers, Aramco should have stated their reserves at 335 billion barrels (260 + 75) in 1978! This number is so inflated as to be ridiculous. The correct number is closer to 125.

When you put this smaller reserve number in perspective, you realize that Saudi Arabia is not the producer of last resort. In fact, it’s possible that they have already passed peak production, which for them was 10.5 million barrels per day in 1980.

All OPEC countries have lied about their reserves in order to have larger quotas. It is considered normal business practices for OPEC members. Proof of this transgression was recently found in Kuwait. Petroleum Intelligence Weekly recently reported that Kuwait has 48 billion barrels of reserves, and not the 99 billion that they have claimed publicly. I would bet this is the same for all OPEC countries. This begs the question, how far off are the OPEC claimed?

Some people point to the huge unconventional reserves in Canadian Tar Sands as a producer or last resort for the global market. Current Tar Sand production in Canada is about 800 thousand barrels day and is increasing about 10 percent per year. They expect to produce about 2.5 million barrels a day by 2015.

There is a large quantity of Tar Sands in Canada. Current proven reserves are estimated to be 350 billion barrels. Potential reserves are projected to be as much as 2 trillion barrels. The problem is that it takes a long time to increase production of unconventional oil. Also, as more oil production comes online after 2015, production declines elsewhere will be intensifying. Even if Canadian Tar Sands production increases to 5 million barrels per day by 2025, this won’t have much impact on global supplies.

Another producer with large potential production is Venezuela. They have potentially 1 trillion barrels of reserves in extra heavy unconventional oil. Their heavy oil production should increase dramatically. As oil prices increase, there is going to be a lot of investment in Venezuela. We should see 1-2 million barrels per day of heavy oil production sometime in the next decade. Like the Canadian Tar Sands, it will be a slow process to expand production.


Leave a comment

Your email address will not be published. Required fields are marked *