Re: OIL

The media brim with warnings of the consequences of oil reaching $50 a barrel.  French oil expert Martin Storey discusses the industry's problems: "I write as a breaking news is "Shell target of Total bid".  This would be "le comble" as we say in French.  Total (until recently known as TotalFinaElf), was in the first half of the 20th century a large and successful company under the name Compagnie Francaise des Petroles.  Then it withered, only to be reborn in the nineties under the management of a true oil-man, Thierry Desmarest.  In 1999, Total stunned the world by taking over Petrofina, the Belgium national oil company, then, a few weeks later, Elf Aquitaine, the French national oil company.  Now, perhaps, Shell, until recently and for decades, the largest oil company in terms of turnover and production (tied with Exxon).  Fascinating industry...

Going back a few weeks, WAIS posted an apocalyptic document from Topica. which I don't know. There are certainly plenty of reputable organisations to get figures and facts from, but what they write about is nothing surprising: all wells have a declining production from the moment they start producing, and many wells "go to water" slowly or suddenly, and eventually have to be shut down when the production of water makes the well uneconomical, by whatever criterion the operating company may have.  This can be delayed a bit by "beaning back" the well, i.e. letting the well produce below its capacity.Upscaling to the scale of a field, the decline problem is mitigated by
drilling more wells to take over the production of the declining wells.  If the figure on the last page of the document is correct for Ghawar: OOIP=145GB (meaning: oil originally in place, 145 billion barrels), then it must be the biggest field in the world, which may well be the case. The drawings on the last page show a normal decline curve for the oil
production, and if water production were plotted too, it would be a mirror image (in the vertical sense): as oil production decline, water production increases, with the total liquid production staying approximately the same.  There's nothing that is not known by everyone involved in Saudi or in the oil industry, and nothing to panic about. 

A big problem the oil and gas industry has been putting up with in the past 15 years or so, is a fundamental misunderstanding from the part of the ever more influential shareholders, who want to manage the oil shares in their portfolio, as they do the dotcom shares.  The oil industry has life cycles of 10, 20, 30, 50 or more years, and hardly
anything less.  Between the time an oil field is discovered and the time it's been produced (and hence, the investors have recouped and cashed in), there's rarely less than 15 years, often much, much longer.  The gas industry has hardly any life cycle less than 20 years.  Nothing happens fast, unless it's negative and we make it happen (e.g. if
something serious happened in Saudi Arabia).  That being said, the markets seem to think that things are changing just now, as in "today", so oil recently hit US$46/bbl. 

Has oil ever been that expensive?  No, not in money of the day, but in discounted (i.e. today's) dollars, it has: in the 70's, around the time of the iranian revolution, when it it >$40 which is about $80 of today's US$.  How much oil have we got left?  The world's oil reserves-to-production ratio was 41 years in 2003, down around 6% from the peak of 43.7 years in 1989.  Both proved reserves and production have increased since 1989,  by 12.5% and 20% respectively.  North America and Asia Pacific are responsible for 90% of the increase in oil production in the past 10
years. For lots of hard statistical info on the industry, see http://www.spe.org/spe/jsp/basic/0,,1104_1718,00.html
For all the useful historical statistics about production, price, etc, about all sources of energy (inc. renewables):
http://www.bp.com/subsection.do?categoryId=95&contentId=2006480 In particular:
http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/publications/energy_reviews/STAGING/local_assets/downloads/spreadsheets/statistical_review_of_world_energy_full_report_workbook_2004.xls

While we're on the subject of the oil industry, you may find it amusing that it carried out research on the potential of nuclear explosions to stimulate gas production from low-yielding reservoirs.  That was in the early 70's (before the first oil shock) and it was led by the US Bureau of Mines in cooperation with the Atomic Energy Commission.  Thankfully, this has not come to anything". 

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