The EIA normally walks hand in hand with the IEA in predicting an abundance of crude for years to come. The recent scandal with the IEA suggested they were under pressure to use optimistic EIA and USGS data in the preparation of their annual reports. With the recent appearance on the Internet of a presentation by Glen Sweetnam of the EIA made in 2009 the partnership may be over.
I reported on this newly discovered presentation a couple weeks ago. In an interview regarding the presentation Sweetnam acknowledged "liquid fuel supplies could actually fall between 2011 and 2015 if investment in new capacity is not there." This is the equivalent of heresy in the cornucopian world of the IEA, EIA and USGS.
The IEA has been rapidly changing their predictions to a lower expected volume five years from now but they are still expecting production growth. Their growth is mainly expected to come from OPEC nations since it is evident now that non-OPEC supply has already peaked.
The IEA normally uses terms like undiscovered, unconventional, undeveloped and unproduced to describe the projected new production that will fill the shortfall between current production and future production targets. I always take issue with the undiscovered portion because how can you quantify the production quantities if the oil has not yet been found? I will go along with a small percentage of increase due to new discoveries because the industry does discover new fields every year. The problem is that the size and quantity of these new discoveries has been falling sharply since 1965.
Recent history has seen a spike in the last two years for the Tupi field off the coast of Brazil. That discovery and some other deepwater finds have pushed the amount found to about 10 billion barrels per year over the last two years. Respectable finds but the world uses 32 billion barrels per year. Even if we could produce every barrel in one year it would only fill one third of our annual demand. In reality the Tupi field will be produced over the next 25 years at the rate of about one million barrels per day. That is a drop in the proverbial bucket.
Back on my original topic the EIA and IEA are normally careful to maintain the party line of adequate supply ahead. They may not know where that supply is coming from but they always claim it is there. As illiterate consumers of complicated government produced data we are supposed to accept it on faith and continue consuming as though everything was fine.
That is where the internal Sweetnam presentation from 2009 has stirred up a hornet's nest of news. The Sweetnam presentation listed every major producer by country and their expected future production. The summary graphic was significantly different than any prior government data. This was probably expected to never be shown outside the EIA briefing and carried the equivalent of a top secret label. It is amazing how many items of a government nature eventually appear in the public domain. I would bet the EIA would desperately like to have this one back.
The graphic shows a summary of current production compared to expectations of increased demand. Starting about 2012 there is a widening gap of "unidentified projects" that balloons to roughly 43 million barrels per day of missing production by 2030.
Of interest to us is the actual decline slopes of existing production plus the shortage of unidentified projects. Since it takes from 5-10 years to bring a major project online this graphic illustrates that there will be a shortage of production through at least 2019. Any new oil discovered today and immediately scheduled for development would not be available in any quantity until 2016 or longer. Likewise any current project underway would be referenced on the chart with a bump in production corresponding to the expected date of production.
This chart is a very good representation of what we in the peak oil community have been reporting for years. It is nice to see that at least behind closed doors the EIA is also in agreement. Now if we could just get them to go public with their knowledge rather than with leaked presentations it would further the effort to find and produce more oil.
Sweetnam Production Graphic
This newsletter is only one of the newsletters produced by OilSlick each day. The investment newsletter is also produced daily and contains the current play recommendations in the energy sector. Stocks, options and futures are featured. If you are not receiving the "Play Newsletter" please visit the subscribe link below to register.
Subscribe to Energy Picks Newsletter