Despite everything you have read about the expected arrival of peak oil in the next 2-3 years there is no need for it to occur. We have plenty of oil on the planet to increase production for decades to come but that possibility is handicapped by politics, terror, wars, mismanagement, lack of technology, bad government and just plain stupidity.
A decade ago there was thought to be roughly two trillion barrels of oil on the planet of which we had already produced one trillion. Today there is still an estimated two trillion barrels thanks to new technology in deepwater drilling, horizontal drilling and better seismic imaging. With all that oil available why should we have to worry about a peak in production in the next 2-3 years?
You only have to look a little farther south to Venezuela for a prime example of the bad government and ultimate stupidity. Chavez has destroyed his countries oil production. It has declined every year since 2002 as Chavez nationalized company after company, kicked them out of the country and took over their facilities. Unfortunately the experience and expertise left with the international workers.
If that was not bad enough he has taken every penny produced by the oil sector and used it for social programs designed to keep him in power. The oil sector has no money to invest in new exploration, new equipment or to even keep the old equipment running. For a country with reserves to rival Saudi Arabia to struggle to produce only 2.7 mbpd is a crime. Unfortunately it won't change until Chavez is deposed and a new government apologizes for its prior sins and begs the international companies to come back and explore.
In Iraq we have the same problem of huge reserves but a political situation that makes producing those reserves extremely hard. Saddam Hussein had let Iraq's oil fields to fall into a deep state of disrepair because he was using the money to build lavish palaces and support a large army to keep the citizens under control. Now producing under 3.0 mbpd it has contracts in place to raise production to 9.0 mbpd by the end of the decade. However, the highly fragmented government is making it very difficult for those companies under contract to get anything done. Analysts believe Iraq could reach 5.0 mbpd by 2015 and maybe 7.0 mbpd by 2020 but only with an extreme amount of investment and massive changes in the existing governmental structure. Iraq is still plagued by a shortage of electrical power, rusting pipelines, broken down wells and infrastructure, terrorist activity and a shortage of trained personnel.
Iran has the second largest reserves in the world but massive stupidity in its government leaders. Iran produces about 3.5 mbpd but could produce double that for decades to come if they could get rid of the government. The president's urge to go nuclear has brought huge sanctions that prevent companies from dealing with Iran. They can get parts for the wells, technology for drilling and expertise in the form of international contracts with companies like Schlumberger or any of the oil majors. Their production is sliding and will continue to decline until they give up their nuclear ambitions and terrorist support. The Iranian oil minister has told the parliament they must invest $25 billion per year in the energy sector or risk becoming a net importer of oil.
Saudi Arabia has more than 260 billion barrels in reserves according to them. Even if they were overstated by as much as 40% as some recent WikiLeaks cables suggest that is still a lot of oil. Saudi oil is relatively easy to produce but they have no interest in adding to production. The Saudi king has said that any newly discovered fields will not be developed in order to leave some for future generations. We don't know how much of that is a smoke screen to defer criticism for not increasing production or some political ploy to disguise their real reserves. Obviously if you don't really have 260 billion barrels in reserve you have to come up with some excuse for not producing a reasonable amount of oil when prices are so high.
Mexico is another example of bad government and bad laws. Mexican production has been spiraling down at a rapid pace because the government takes every penny of excess cash from Pemex to operate the government. There is no money for exploration and new production and their fields are in rapid decline. They have a law that prevents foreign companies from exploring for oil in Mexico so they can't take advantage of investment by companies like Chevron and Exxon. They recently changed the law to allow the government to contract with foreign firms but only on a production contract not a revenue share contract. Major international firms don't want to spend billions on exploration and then get paid back at a contract rate of $2 a barrel. As pubic companies they have to produce a profit for their shareholders. Mexico is so close to the U.S. and so easily accessible they could double production in 5-7 years if they would open up the country to foreign exploration at reasonable terms. There would be a land rush of companies racing to Mexico to drill if they were given the opportunity.
Last in today's list but by no means the last in the global list of problem countries is the USA. Yes, the USA is also on the list of poorly managed countries that could significantly increase production. Picking on the oil companies has become a national pastime like baseball and barbeques. There are over 300 permit applications pending for the Gulf of Mexico and there have only been six approved in the last ten months. There are millions of acres inside the U.S. with known oil reserves but they are off limits to drilling. Drilling in Alaska has been halted and all the outer continental shelves are off limits. The Alaskan pipeline has declined from 2.0 mbpd to 600,000 bpd and still falling. Experts say if something is not done soon to increase production there could be serious permanent damage that would take the pipeline offline for years. It was not designed to pipe oil at that level. It is meant to be pressurized by a high volume of oil traffic. Some analysts believe we could increase production in the USA by 5.0 mbpd within 10 years if known oil reserves were opened for drilling and permits were approved within 10-weeks instead of 10-months.
There is plenty of oil on the planet. Unfortunately production is restrained more by political complications than geologic limits. There is no reason for the planet to experience a peak in oil production for decades to come. We as humans are our own worst enemy in this regard.
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The OilSlick Newsletter is based on the expectations for global oil production of light sweet crude to peak and begin to decline in the 2012-2014 timeframe. I am calling this "Peak Sweet™" instead of Peak Oil. This is the point where global production of conventional light sweet crude supplies can no longer be supplemented by enough oil sands production, deepwater oil production, biofuels and natural gas liquids to offset the decline in existing fields. The roughly 6% annual decline of existing production due to depletion is larger than the rate of new discoveries and new production being added each year. The Peak Sweet™ countdown clock is ticking and time is growing short. Peak Oil will arrive shortly thereafter. Are you prepared?