New oil discoveries resulting from high crude prices and the introduction of advanced technology have reduced the risk of an imminent supply crisis but the debate on peak oil remains alive, a veteran Arab oil analyst has said.
Nicolas Sarkis, Director of the Paris-based Arab Petroleum Research Centre (APRC), said up to 12 billion barrels in new crude discoveries have already been made in 2009, the highest level since 2000.
"The new and sometimes very large oil discoveries that have been announced over the past three years raise the question of whether it is still topical to talk of the risk of a supply crunch towards the middle of the next decade or to discuss the approach of peak oil," said Sarkis, whose centre acts as an advisor to the 11-nation Organisation of Arab Petroleum Exporting Countries (Oapec).
"However, despite the successes recorded in recent times, the fact is that new discoveries are not sufficient to reverse the trend that has been apparent since the early 1980s, which is to say that the volume of oil discovered each year remains below the volume consumed, amounting to some 31 billion barrels per annum at the current rate," he wrote in the APRC's monthly magazine.
He said while proven crude reserves have increased by 34 per cent over the past 20 years, that has essentially been due to an improvement in reserve recovery rates and to a re-evaluation of reserves already discovered.
"As for the impact of new discoveries on the supply/demand balance, that can only show up gradually, in view of the time needed for the development of new fields. In any event, however, that is only one of the parameters that will determine the supply/demand balance," said Sarkis. "The other factors are the development of demand, which is largely determined by economic growth rates, and of crude oil prices."
Assuming that global economic growth picks up by four to five per cent a year, Sarkis said the volume of spare oil production capacity would fall that much more quickly from the current level of six million barrels per day to one more in line with that in mid-2008, when the price of WTI topped $147 a barrel, insofar as supply is increasingly affected by the natural decline in output.
As for the current level of crude oil prices of about $80, it is certainly sufficient for exploration to continue in certain zones that are not too costly, he said.
But he stressed this would still require prices to stabilise at their current level in real terms or to increase, which "is far from certain".
"For all these reasons, new discoveries seem to have lessened the risks of a near-term shortage of supply and put back for some years the dreaded date when world oil production will peak," he said. "That is a risk that certainly deserves to be taken into consideration, as observed by the latest report of the UK Energy Research Center. In the view of the authors of this report, peak conventional oil production is probable before 2030, and it is even possible that it could occur before 2020."
Citing official and independent reports, Sarkis said on all five continents there have been oil discoveries at a rate that has not been seen for a decade. The largest and most promising finds seem to be those made by Petrobras, including Tupi and Iara in Brazil, which contain estimated reserves of some five billion and 2.9 billion barrels, respectively; by Tullow Oil off Ghana – Jubilee (1.4 billion barrels); by British Petroleum in the Gulf of Mexico – Tiber (0.75 billion barrels) and Kashida (0.5 billion barrels); and more recently by Anadarko off Sierra Leone – Venus (0.2 billion barrels).
"In 2009 alone, nearly 200 crude oil discoveries have already been reported around the world, by the majors as well as by national oil corporations and small and medium-sized firms," Sarkis said.
According to preliminary estimates advanced by the companies, 2009 is already a good vintage, with 10 to 12 billion barrels of reserves having been discovered during the first six months, the highest level since 2000, he added. "This performance is the outcome of technological progress, the sharp rise in oil prices since 2003 and the exploration-production boom in those countries that are still open to foreign investors," he said.
Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here.
www.business24-7.ae
