Con referencia a Goodstein, su argumentacion del pico de Hubbert, y el libro que presenta en esa conferencia:
The bottomless beer mug
Apr 28th 2005
From The Economist print edition
Why the world is not running out of oil
“OIL is found in the minds of men.” So says a popular bumper sticker in America's oil patch. There is something in that. Daniel Yergin, author of “The Prize”, a Pulitzer prize-winning history of oil, argues that the history of oil is one of astonishing innovations. In 1859, Colonel Edwin Drake struck oil in Pennsylvania by drilling rather than digging, adapting the old Chinese trick of drilling for salt. That prompted the world's first oil boom, which inevitably led to bust as oil flooded the market and prices collapsed.
In 1901, another set of unlikely innovators struck oil in unpromising terrain at Spindletop, Texas. They used novel drill bits that rotated through the earth rather than merely pounding it, enabling them to reach far greater depths. This started up a ferocious gusher that spewed out nearly 1m barrels of oil in ten days. It marked the birth of the modern oil industry. Inevitably, this boom once again led to bust as oil grew ever more plentiful.
And yet, despite this history of innovation and abundance, concerns about depletion are once again clouding the industry's future. This time round, argue the doomsayers, depletion really is looming, and technology will not come to the rescue, as it has done in the past. If they are right, today's oil prices are but a harbinger of much, much worse to come.
Clearly, oil is a non-renewable resource that has to run out some day. Those who expect that day to come sooner rather than later usually point to Hubbert's peak. M. King Hubbert was a geologist at Shell who predicted in 1956 that America's oil production would peak and begin to decline in the early 1970s. In fact, oil production from the 48 contiguous states did peak around 1970. The current debate on depletion is about when the global “Hubbert's peak” will be reached.
The United States Geological Survey did a comprehensive study in 2000 and concluded that such a peak was at least two decades off. The IEA broadly concurs, arguing that oil supplies will not become constrained until after 2030, provided the necessary investments are made. However, some analysts disagree sharply. The leading lights among the petro-pessimists are Colin Campbell and Jean Laherrère. In a much-quoted article in Scientific American in 1998, they predicted that the global Hubbert's peak would be reached around now. There has been a flood of gloomy books with such titles as “Out of Gas” and “The End of Oil”. And Mr Simmons, the petro-pessimist investment banker, is bringing out a book in May that questions the sustainability of production in Saudi Arabia.
All found?
In essence, the pessimists say that there is a fixed amount of oil in the ground to be found, and that mankind has found it already. According to Jim Meyer of the Oil Depletion Analysis Centre, a British think-tank, “Discovery clearly peaked in the 1960s. We are out of North Seas.” He argues that annual oil consumption has exceeded new discoveries since the 1980s, indicating that the world is running down its stock of “found” oil, and reckons that 18 major oil-producing countries, currently making up about 30% of world output, are now past their peak.
Given that oil companies have poked and prodded the entire Earth (save Antarctica) for over a century, goes the argument, there cannot be any more “super-giant” fields such as Saudi Arabia's Ghawar, which alone produces 5m bpd. Mr Campbell has neatly summarised this view of the problem: “Understanding depletion is simple. Think of an Irish pub. The glass starts full and ends empty. There are only so many more drinks to closing time. It's the same with oil. We have to find the bar before we can drink what's in it.”
But this argument is wrong both on a philosophical and a practical level. The philosophical problem, says Michael Lynch of EnergySEER, a consultancy, is that the pessimists treat the level of recoverable oil resources as fixed—like the amount of beer in that mug. In fact, expert estimates on the ultimate recoverable resource base have consistently grown over the past few decades, even though the world has been guzzling oil as if there was no tomorrow (see chart 5).
Peter Odell of Rotterdam's Erasmus University points out that “since 1971, over 1,500 billion barrels have been added to reserves. Over the same 35-year period, under 800 billion barrels were consumed. One can argue for a world which has been ‘running into oil' rather than ‘out of it'.”
What makes the estimates go up continuously is a combination of economics and innovation. The IEA explains the process this way: “Reserves are constantly revised in line with new discoveries, changes in prices and technological advances. These revisions invariably add to the reserve base.”
A few decades ago, the average oil recovery rate from reservoirs was 20%; thanks to remarkable advances in technology, this has risen to about 35% today. But despite this improvement, two-thirds of the oil known to exist in reservoirs is still abandoned as uneconomic, leaving room for tomorrow's discoveries or innovations to lift recovery rates and magically push the global Hubbert's peak even further towards the horizon. Pundits had predicted that fields in the British North Sea would reach their maximum output by 1990. In fact, they have only just peaked.
Dozens of similar examples from around the world added up to defy Mr Campbell's prediction of a global Hubbert's peak by now, which plainly has not materialised. Indeed, even the legendary Hubbert did not get it quite right. His forecast for the American production ignored the vast quantities of oil that lie under the deep waters of the Gulf of Mexico. That may seem an unfair critique, as he had no way of knowing about the wave of offshore drilling technologies that have become available in the past decade. But that is the point: today's pundits cannot foresee tomorrow's innovations.
Petro-optimists say the future for oil is bright. Mr Odell argues in a recent book, “Why Carbon Fuels Will Dominate the 21st Century's Global Energy Economy”, that conventional oil will not peak until nearly mid-century, and that unconventional oil resources such as Canada's tar sands will peak only at the end of this century. Morris Adelman of the Massachusetts Institute of Technology has even argued that the “amount of oil available to the market over the next 25 to 50 years is for all intents and purposes infinite.”
A new age of discovery
But there is a more practical fallacy embedded in the gloomy forecasts too. “I challenge the idea that the era of discovery is over in oil,” says Total's Mr de Margerie. Thanks to the cold war and other political constraints on western investment, much of the world has yet to be explored with the aid of the latest technologies.
Russia is a good example. When it opened up to private investment under Mr Yeltsin, it saw a huge inflow of modern technology and management talent, causing a dramatic leap in production—which has now been put in jeopardy by Mr Putin's crackdown on the sector.
Similarly, other parts of the world are still “under-rigged” and under-examined. According to Mr Fu, CNOOC's chairman, “our offshore prospects are just beginning. A promising area the size of two North Seas has yet to be explored.” When India recently liberalised its oil-exploration sector, Britain's Cairn struck oil in Rajasthan soon afterwards. V.K. Sibal, India's director-general for hydrocarbons, expects much more, “maybe even a super-giant deep offshore somewhere near the waters off Myanmar.”
The unexplored potential in the Middle East remains vast. Pete Stark of IHS Energy, a leading consultancy on exploration, says that Iraq has over 130 undrilled prospects, and expects its proven reserves to rise sharply over time. Neighbouring Saudi Arabia has about 260 billion barrels of proven oil reserves today. Mr Naimi, the oil minister, is confident that current and future technologies will help lift that figure by 100 billion barrels in the next few decades, and points to an unexplored region on the Saudi-Iraqi border which alone is the size of California.
Total's Mr de Margerie points to frontiers that will be opened up by technology: “There may not be any more glamorous Ghawar fields, at least onshore, but there is tremendous opportunity if we look at ‘deep horizons'.” He believes that there are large deposits 10,000 metres (32,800 feet) or more underground. The snag is that they are usually under very high pressure or very hot, and may be extremely acidic. But as technology improves, he thinks, “these very strange hydrocarbons” will become economic.
The industry is exploring under water at depths that were unimaginable a decade or two ago
Already, the industry is exploring under water at depths that were unimaginable a decade or two ago. In the Gulf of Mexico and elsewhere, oil rigs now float atop 3,000 metres (10,000 feet) of water. These marvels of engineering are stuffed with the latest in robotics, electronic sensors and satellite equipment. Using fancy “multilateral” wells that twist and turn in all directions, they can hit giant underwater oil pockets miles away from the rig.
In short, there are lots of frontiers left. Yet even if there is plenty of oil still available under the ground, getting it to market will pose huge problems. It will take lots of innovations, as well as courage and capital, to move it to where it is needed.
That points to the petro-pessimists' second great doubt: that the oil industry has run out of techno-fixes. They say that technological advances such as multilateral wells are a mixed blessing because they cause reservoirs to be depleted faster; that there are no more “killer applications” like 3D seismic reservoir-imaging technology left to transform the industry; and that the majors have largely abandoned the vital task of investing in upstream research and development in recent years, as part of a misguided cost-cutting drive.
Petro-pessimism
This is a more serious critique than the one about Hubbert's peak, because it cuts to the heart of what will make or break the oil majors. But Mr de Margerie challenges both strands of petro-pessimism: “The peak will come, but we can keep the plateau for a long time with technology.” So who is right?
First, consider the idea that technology could be a mixed blessing. It is true that in some fields the majors have recently found that investments in the latest technologies pushed up output and led to faster depletion. Critics argue that these technologies merely act as fatter straws, helping to suck out more liquid but ultimately emptying the glass faster too.
Roger Anderson of Columbia University has looked for this alleged “faster depletion effect” in over 40 oil and gas fields, using the latest innovations, and found no evidence for it. “The more prevalent problem”, he says, “is not that there is faster depletion, it is that oil companies desperate to get the black gold into the bank are ignoring modern asset-management techniques.” He points to firms using advanced “4D” seismic production technologies but failing to tie production of oil and gas to the market and price conditions prevailing at the time.
Besides, the underlying assumption that the recoverable reserves are fixed might be wrong in itself. A fatter straw could end up producing more oil both now and later if the resource base is dynamic. In most cases, modern techniques clearly prolong a field's life and increase the recoverable reserves.
Andrew Gould, chairman of Schlumberger, points out that 25 years ago only one-sixth of all exploration wells drilled were successful; now the figure is two-thirds. Over that period, the success rate for development wells has gone from hit-or-miss to nearly 100%. He is convinced that the future lies in embedding digital technologies such as down-hole sensors, real-time communications equipment and other kit that will make for the smart oil field of the future.
Companies already use some of these techniques when they drill wells, but he thinks they should apply them to monitoring the wells right from the start. “Progressive illumination” was the management philosophy of the past: “You learned as you went along. Now you draw a much better picture up front, and monitor the reservoir carefully from day one.” Private companies do not want to spend such money up front, at least not yet, but he speaks approvingly of Saudi Aramco's long-term thinking.
High-tech desert
Rising out of the windswept deserts of eastern Saudi Arabia is a petroleum visualisation centre on a par with the best in Houston. Backing it up is a bank of computers with more data-storage capacity than America's NASA. Unlike most private companies, Aramco has invested in observation wells that monitor its reservoirs in real time. Mr Jumah, the firm's boss, explains that he can check on what is happening deep underground in a well hundreds of miles away from his laptop computer. The company's geologists say this monitoring technology allows them to act quickly to ward off the problems of field decline to which Mr Simmons has drawn attention.
What about the argument that there are no breakthrough technologies left to transform the oil business? On one estimate, the net benefit to the global oil industry from 3D seismic imaging (through reduced drilling costs, more exploitation and so on) amounts to $11 billion a year. But there is no obvious blockbuster technology to follow it, though some lesser ideas are being investigated. For example, Exxon and Schlumberger are looking into whether adding electromagnetic analysis to seismic soundings can improve the visualisation of reservoirs, and Apache is investing in technology that allows three-dimensional visualisation without the need for big amphitheatres or special goggles.
Peter Robertson, vice-chairman of Chevron, says that he “would not bet the company on a new 3D seismic”. But he is convinced that incremental technologies matter because they can help lift recovery rates by a few percentage points and improve recovery in existing fields: “Flattening the decline curve could mean more than even a big new discovery.”
David Lesar, Halliburton's boss, has not given up hope for a breakthrough. He argues that “when 3D seismic or directional drilling first came, nobody saw their potential. It was the unexpected application of those technologies that was key.” He thinks today's innocuous technologies could prove tomorrow's breakthroughs, as long as the industry continues to encourage innovation.
That points to the most explosive criticism levelled at the oil majors: that they no longer have the capacity to innovate. A few decades ago these firms were fiercely proud of their proprietary technologies, which they believed gave them a competitive edge. But during the 1990s most majors slashed funding in this area, leaving service firms such as Schlumberger and Halliburton to pick up the slack.
“Ten-dollar oil killed upstream research,” says one executive. Ivo Bozon of McKinsey, a consultancy, reckons that the majors slashed upstream R&D spending from $3 billion in 1990 to below $2 billion in 2000 (both in current dollars). Over the same period, the service companies increased their investment in research from $1.1 billion to $1.7 billion. The sharpest cuts, adds Mr Bozon, were made by American companies.
“These guys need to explore, but they don't know how to do it any more,” complains Roice Nelson of Geokinetics, which makes reservoir visualisation software for the oil industry. Mr Nelson helped found Landmark Graphics, an industry pioneer in imaging software, so his criticism stings. He notes that the industry sacked many of its best-qualified technical staff, and that relatively few college students now are going into petroleum engineering. “We'll be working till we're past 80,” he sighs.
The majors now realise that this shift away from technology, once their core strength, was a mistake that has benefited three groups of rivals: the service companies, the “mini-majors”, and the NOCs. Mr Lesar at Halliburton is delighted: “There's been a fundamental shift in ownership and development of technology from the majors to the service companies.” The problem is that the service companies are less capable of investing for the long term, because their balance sheets tend to be weaker than the majors'. Moreover, they need their customers to adopt those technologies to make them commercially viable—but the majors have proved gun-shy.
The shift in innovation has been a boon to smaller oil companies, which are not so risk-averse. Especially since the wave of mergers, the majors need mega-projects with long lives to replace reserves. That has made them wary of trying new technologies. Chevron's Mr Robertson says that taking a flier on a project with a long lead time and high investment is simply too risky for his firm. Mr Farris, Apache's chief executive, takes quite a different approach: “We go to the service companies and say, ‘What have you got?' Hell, we'll spend money to try it.”
The rise of the indies
All this hurts Big Oil in another way: the NOCs no longer need them to get access to modern technology. The more sophisticated NOCs, like Saudi Aramco, buy technology directly from the service companies, but many others are turning to the smaller, independent majors, known as “indies”, for help.
Jim Hackett, chief executive of America's Anadarko, explains that with a market capitalisation of $20 billion and a capital budget of $3 billion a year, his firm is big enough to challenge the big boys: “I can't compete with Exxon in 20 countries, but I can beat them in a few.” Aside from their speed of decision-making and their readiness to embrace new technologies, he thinks that resource nationalism gives the smaller western oil firms an advantage. “We are no threat, we have no baggage of the Seven Sisters. Sometimes locals don't even know that we are an American firm.”
Whether the majors will regain their skills as technology innovators is an open question. Exxon, for one, is making a big push. The firm spends some $600m a year on upstream R&D, more than its rivals, and sees technology as the key to unlocking future reserves.
The rise of the NOCs and resource nationalism ensures that the majors will not have cheap and easy pickings in future. If they are to survive, they must adapt and change—and perhaps even move beyond petroleum, as the next section explains.
