From the NY Times: Read this article...keep in mind that at current global consumption rates, 1 billion barrels of oil represents approximately 12-15 days supply. We are now averaging approximately 10-20 billion barrels discoveries per YEAR spread out over hundreds of small finds in dispersed geographical areas - all in very hard to get at places (primarily undersea) and most being heavy oils requiring a lot of refinement, not the light crude we are used to.
Oil Industry Sets a Brisk Pace of New Discoveries
Ken Childress/Transocean
An offshore oil rig, shown here off Brest, France, and now under
contract to BP off the coast of Angola. More than 200 oil discoveries
have been reported so far in 2009 in dozens of countries.
Published: September 23, 2009
The oil industry has been on a hot streak this
year, thanks to a series of major discoveries that have rekindled a
sense of excitement across the petroleum sector, despite falling prices
and a tough economy.
These discoveries, spanning
five continents, are the result of hefty investments that began earlier
in the decade when oil prices rose, and of new technologies that allow
explorers to drill at greater depths and break tougher rocks.
“That’s
the wonderful thing about price signals in a free market — it puts
people in a better position to take more exploration risk,” said James
T. Hackett, chairman and chief executive of
Anadarko Petroleum.
More
than 200 discoveries have been reported so far this year in dozens of
countries, including northern Iraq’s Kurdish region, Australia, Israel,
Iran, Brazil, Norway, Ghana and Russia. They have been made by
international giants, like
Exxon Mobil, but also by industry minnows, like Tullow Oil.
Just this month,
BP
said that it found a giant deepwater field that might turn out to be
the biggest oil discovery ever in the Gulf of Mexico, while Anadarko
announced a large find in an “exciting and highly prospective” region
off Sierra Leone.
It is normal for companies to discover billions
of barrels of new oil every year, but this year’s pace is unusually
brisk. New oil discoveries have totaled about 10 billion barrels in the
first half of the year, according to IHS Cambridge Energy Research
Associates. If discoveries continue at that pace through year-end, they
are likely to reach the highest level since 2000.
While recent
years have featured speculation about a coming peak and subsequent
decline in oil production, people in the industry say there is still
plenty of oil in the ground, especially beneath the ocean floor, even
if finding and extracting it is becoming harder. They say that prices
and the pace of technological improvement remain the principal factors
governing oil production capacity.
While the industry is
celebrating the recent discoveries, many executives are anxious about
the immediate future, fearing that lower prices might jeopardize their
exploration drive. The world economy is weak, oil prices have tumbled
from last year’s records, corporate profits have shrunk, and global
demand for oil remains low. After falling to $34 in December, oil
prices have doubled, stabilizing near $70 a barrel. But if the world
economy does not pick up, some analysts believe the price could fall
again.
Oil companies contend that is not a prospect they can
afford. Despite reaping record profits in recent years, many executives
have warned that they need prices above $60 a barrel to develop the
world’s more challenging reserves. In fact, some exploration activity
has already slowed this year, as producers seek better terms from
service companies and contractors.
It is not just oil that is
benefiting from the exploration boom. Repsol, Spain’s biggest oil
company, said this month that it had discovered what could turn out to
be Venezuela’s biggest
natural gas
field. In recent years, companies have found substantial natural gas
reserves in the United States, from shale rocks once believed to be
impossible to drill.
“The No. 1 question that exploration teams
have right now is, Where do we go next?” said Robert Fryklund, who ran
the operations of
ConocoPhillips in Libya and Brazil, and is a vice president in Houston at Cambridge Energy Research Associates.
Exploration
spending swelled in recent years, partly to offset a doubling of costs
throughout the industry — from steel prices to the cost of renting
deepwater drilling rigs. A big issue confronting the industry now is
how to drive down costs while maintaining a high level of exploration.
On average, costs have fallen by 15 to 20 percent from their peak,
according to petroleum executives.
Exploration remains a risky,
and costly, business, where some deepwater wells can cost up to $100
million. From 30 to 50 percent of exploration wells find oil.
Some
executives are also worried the world might face a shortfall in
supplies in coming years if another decline in oil prices causes
exploration to falter.
The chief executive of the French oil
giant Total, Christophe de Margerie, has warned that such a supply
crunch is possible by the middle of the next decade. “There could be a
shortage of capacity,” he said. His concerns echoed those of
Abdullah al-Badri, the secretary general of the Organization of the
Petroleum Exporting Countries, who said that lower oil prices also
threatened investments by
OPEC nations.
Saudi Arabia is also unlikely to expand its production in coming years because of the uncertainty clouding future oil demand,
Ali al-Naimi,
the kingdom’s oil minister, signaled earlier this month. Saudi Arabia
is just completing a $100 billion program to increase its capacity to
12.5 million barrels a day, from around 9 million barrels a day just a
few years ago.
Although they are substantial, the new finds do
not match the giant fields discovered in the 1970s, like Alaska’s
Prudhoe Bay, Ekofisk in the North Sea, or Cantarell in Mexico. They are
also dwarfed by the last enormous discovery, the Kashagan field in the
Caspian Sea, discovered in 2000 and estimated to hold over 20 billion
barrels of oil.
“We have not seen another Kashagan, but still
these finds are very material,” said Alan Murray, the exploration
service manager at Wood Mackenzie, a consulting firm in Edinburgh.
Since
the early 1980s, discoveries have failed to keep up with the global
rate of oil consumption, which last year reached 31 billion barrels of
oil. Instead, companies have managed to expand production by finding
new ways of getting more oil out of existing fields, or producing oil
through unconventional sources, like Canada’s tar sands or heavy oil in
Venezuela.
Reserve estimates typically rise over the life of a
field, which can often be productive for decades, as companies find new
ways of getting more oil out of the ground.
The industry’s record
has improved in recent years, thanks to high prices. According to
Cambridge Energy Research Associates, oil companies have found more oil
than they produced for the last two years through a combination of
exploration and field expansions. “The appetite for opening new
frontiers when prices were low in the 1990s was very small,” said Paolo
Scaroni, the chief executive of Italy’s oil giant Eni. “Today, the
biggest discovery of all is technology.”
One of the largest finds
this year was made by a small producer, Heritage Oil, at the Miran West
One field in the Kurdistan region of northern Iraq. It found nearly two
billion barrels of oil and plans to drill a second well before the end
of the year. While the central government of Iraq has had a hard time
attracting investors to develop its huge fields, local authorities in
Kurdistan have been successfully wooing foreign producers.
Meanwhile,
in the Gulf of Mexico, BP’s discovery proves that the area remains one
of the most promising oil regions in the United States. BP has
estimated that the Tiber field holds four billion to six billion
barrels of oil and gas, which would be enough, in theory, to meet
domestic consumption for more than a year. “In 30 years I’ve
been in the business, the Gulf of Mexico has been called the Dead Sea
countless times,” said Bobby Ryan, the vice president of global
exploration at
Chevron. “And yet it continues to revitalize itself.”