Letter to the Financial Times
Just as the Financial Times’ news coverage of oil was beginning to improve (“Oil watchdog reworks reserves forecasts”, 27.12.07), Lex goes and spoils it with a truly shoddy analysis: “Peak no evil” (03.01.08) rehearsed all the old myths that have been comprehensively debunked in recent years.
Tilting against a 30-year old Hubbert forecast for global peak oil in 2000 that turned out to be premature proves nothing. Peak forecasts today benefit from decades of additional exploration experience - in which the amount of oil actually discovered each year has fallen relentlessly - and more advanced statistical techniques.
The idea that there are “large unexplored areas” in Saudi Arabia – or anywhere else in OPEC - is simply not true, as Edward Price, a former Vice President of exploration and production at Saudi Aramco, explained at an investment conference in New York last month.
According to figures from PFC Energy, in OPEC as a whole there have been over 1000 discoveries since 1980, of which only 10 percent were larger than 130 million barrels (less than two day’s global consumption), and 50 percent were smaller than 8 million barrels. That size distribution tells you that major new finds are unlikely, whatever the Saudis would like the credulous to believe.
Finally Lex rests its case on the fact that the global reserves-to-production (R/P) ratio has remained fairly constant. To understand how meaningless this is, you need only reflect that although British oil production has slumped by half since it peaked in 1999, the R/P for the UK North Sea has in fact risen. No doubt this helps the Lex team sleep easier at night.
It is curious that although many captains of the oil industry now accept the case for an early global peak, Lex continues to stick its head in the (oil) sands.