Technosanity #18: Matt Simmons discussing oil supply disruptions

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Matt Simmons is Chairman of Simmons & Company International, a specialized energy investment banking firm. Mr. Simmons' recently published book Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy has been listed on the Wall Street Journal's best-seller list. He has also published numerous energy papers for industry journals and is a frequent speaker at government forums, energy symposiums and in board rooms of many leading energy companies around the world. Mr. Simmons is married and has five daughters. His hobbies include watercolors, cooking, writing and travel.

His presentation is to warn of a 'run on the bank' as it applies to oil supplies. He warns of how this can cause a major disruption very quickly and which is a gravely serious problem. There's an analogy to how quickly the financial system melted down.

Slides: http://www.aspo-usa.org/aspousa4/proceedings/Simmons_Matthew_ASPOUSA2008.pdf

The meltdown demonstrated various flaws in the financial system which had been built. The lack of regulation, the high leverage figures, it all made for a nonresiliant system which collapsed like a house of cards. There was an illusion that the bigger the financial institution the more it was too big to fail, but we saw giants fall.

Risk is a very real thing. Leverage can be dangerous. Audited financial numbers do not always represent genuine reality.

In the oil industry there is even less knowledge about the true situation. In the financial system there is regulation and required disclosures, even as much of that system has been deregulated. In the oil industry there is no regulation, there is no federal reserve, no watchdogs, etc.

Just like the quick collapse of the financial system, can the oil industry also go through a quick collapse and what is the effect if it does? The question to be concerned over is how resiliant is the oil delivery system to disruption. How easily can oil supplies be disrupted? How much cushion is in the system to even out disruptions? What alternatives do we have if oil supply is disrupted to us? What is the effect on our daily life?

The system collapsing means we could still have oil in the ground but have a society unable to function to the level required to deliver it to market as a finished product.

Energy Oxymorons:

"We need Energy independence" -- 100% impossible to create

"Technology is a game changer" -- Technologies have zero impact on these risks

"Drill our way out of this mess" -- No spare rigs and no places to drill where oil can be retrieved easily

"Energy system is efficient and transparent" -- Much hidden data rather than the great transparency of the financial system

Technosanity #18: Matt Simmons discussing oil supply disruptions

Links: 

Matt Simmons bio

Links: 

http://www.aspo-usa.org/aspousa4/proceedings/Simmons_Matthew_ASPOUSA2008.pdf

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Technosanity #17: QA session with Ken Verosub, Jeremy Gilbert

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Q&A session with Ken Verosub and Jeremy Gilbert immediately following the presentations they gave and which were broadcast in immediately prior Technosanity Podcast episodes.

Technosanity #17: QA session with Ken Verosub, Jeremy Gilbert

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Technosanity #16: Peak Oil Global Overview, An American Wake Up Call

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A presentation at ASPO-USA 2008 by Mr. Jeremy J Gilbert, Managing Director, Barrelmore Ltd Jeremy Gilbert. Jeremy is the recently retired Chief Petroleum Engineer from British Petroleum (BP) where he was responsible for the company's worldwide petroleum engineering performance and associated research and development program. He joined BP in 1964.

His topic is a general overview of Peak Oil, specifically focusing on why it is time for America to wake up to Peak Oil. There have been a series of wake up calls, but has much changed?

While America has slept on: 2001: Discovery rates continue decades-long fall; Calculations suggest reserves can’t meet demand projections; Some recognition of political, investment risk in developing resources. 2008: No improvement in resource situation; New, more accurate, calculations of supply define earlier and clearer peak; Political will to increase supply clearly absent; prices not stimulating investment to increase supply

There are three problems: Geology, Investment, Policy of main producers. These, taken together, make the future of oil very difficult

Why are there still political leaders like Newt Gingrich or Henry Kissinger continuing to say there is no problem.

It's not a problem which higher oil prices will fully solve. According to these leaders or to most economists it is a simple problem of supply and demand. Higher demand will cause a higher price and it will do two things, incentivize customers to cut back, and incentivize energy producing countries to look for more oil or to use alternative methods. But this ignores a deeply serious problem, that in oil field after oil field it has been observed that oil production reaches a peak at the midway point, and then inevitably goes into a production decline. No amount of money will change the issue that the planet cannot provide more oil.

Technosanity #16: Peak Oil Global Overview, An American Wake Up Call

Links: 

http://www.aspo-usa.org/aspousa4/proceedings/Gilbert_Jeremy_ASPOUSA2008.pdf

Links: 

Mr. Jeremy J Gilbert, Managing Director, Barrelmore Ltd

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Technosanity #13: Peter Wells at ASPO-USA 2008

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Peter Wells.. Neftex Petroleum Consultants, Ltd
bio: http://www.aspo-usa.org/aspousa4/ConfirmedSpeakers.cfm?bid=510
slides: http://www.aspo-usa.org/aspousa4/proceedings/Wells_Peter_OPEC_ASPOUSA2008.pdf

Oil geologist and other work in the oil industry in the Middle East, former Soviet Union, West Aftrica, etc. Currently working as a consultant with one contract being Toyota. Toyota had studied and internalized Peak Oil long ago, and 6 yrs later developed the Prius.

OPEC countries are the major oil producers. They produce 43% of world oil, and this is growing. They have a dilemna about investing in more production capacity. They are being asked to make more investment but they did so in the 1980's only to see demand dry up. They are reluctant to make more investments which will sit idle.
Venezuela & Iran & Iraq are a bloc of OPEC which want high prices. Many countries, especially middle east, see their oil as a National Heritage which they can leave to their grand-children. If they use it all up doing production at the highest rate possible then their National Heritage will be gone. Hence the middle east countries are likely to limit oil production for this reason.

OPEC exploration success peaked 40 years ago. In general there has been little success with oil exploration for a very very very long time (40 years). The argument is there are no major oil fields left to find.

He showed several charts of all the liquid fuels. The "liquids model" includes all forms of liquid fuels, including liquified natural gas, biofuels, tar sands, etc. Everything but crude oil is a miniscule slice compared to what crude oil supplies. For these other sources to replace crude oil is a huge leap to accomplish.

There was a price floor of $20/bbl which is the amount Saudi Arabia required to run their country. In 2002 the oil prices began to rise. Around that time the 'spare capacity' started peaking (production infrastructure was running full bore). This year more investment in Saudi Arabia infrastructure meant there's now more capacity and the price began to drop.

"Spare Capacity" is the amount of production capacity your infrastructure can do at maximum above what the current production rate is. That is, it's the amount that production can be increased. Too much spare capacity and prices are low, whereas too little spare capacity leads to high oil prices and demand destruction. "Demand destruction" means people being priced out of the market and looking for alternatives.

Components of future crude oil production:- 1 trillion barrels claimed in IHS databases, 445 billion barrels in Tar Sands, unknown further amounts from future exploration and enhanced oil recovery

The USGS has estimates which indicate there are future large discoveries to be made. A big question about the future of oil is the amount of future oil field discoveries. Will there be few discoveries or large discoveries? If there are large discoveries then the oil peak is pushed into the future, but if there are few discoveries then the oil peak is closer at hand.

His organization believes the USGS is incorrect and that there will be few new discoveries and no large new discoveries.

Technosanity #13: Peter Wells at ASPO-USA 2008

Links: 

http://audio.davidherron.com/technosanity/episode-13-plenary-vbr.mp3

Links: 

http://www.aspo-usa.org/aspousa4/ConfirmedSpeakers.cfm?bid=510

Links: 

http://www.aspo-usa.org/aspousa4/proceedings/Wells_Peter_OPEC_ASPOUSA2008.pdf

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