ODAC News
Sunday 17 June
The Oil Depletion Analysis Centre
1/ World oil supplies are set to run out faster than expected, warn
scientists (The
Independent, Thu 14 Jun)
2a/ Are
global market bubbles set to blow?
(BBC News, Thu 14 Jun)
2b/ We're
all doomed? (BBC News [Robert Peston,
BBC's business editor], Wed 13 Jun)
3a/ Food prices defy inflation [short video]
(BBC News, June 2007)
3b/ Floods
and drought send price of wheat soaring
(Financial Times, Fri 15 Jun)
4a/ BG
urges different oil, gas taxation off UK (Oil
and Gas Journal, Thu 14 Jun)
4b/ Shell
and ExxonMobil scale down North Sea presence
(Financial Times, Fri 15 Jun)
4c/ North
Sea running dry says BP
(ThisIsMoney, Wed 13 Jun)
4d/ SHOCK
AS SHELL PUTS OIL ASSETS UP FOR SALE
(
5/ Petrol problems about
peak oil, not snake oil (The Age [
6/
6a/ New
Low Cost Air Carrier Set Up in Russia (FC Novosti, Fri 15
Jun)
6b/ Half
of Gas from Shtokman Field to Be Liquefied
(FC Novosti, Fri 15 Jun)
6c/ Russian
Gas Supplies to China May Be Postponed (FC Novosti, Wed
13 Jun)
7/ Oil demand ‘rising
faster than expected’
(Financial Times, Tue 12 Jun)
8/ Boeing forecasts near
tripling of air traffic
(Financial Times, Wed 13 Jun)
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1/
World oil supplies are set to run out faster than expected, warn scientists (The
Independent, Thu 14 Jun)
http://news.independent.co.uk/sci_tech/article2656034.ece
Comment: “A World Without Oil” - This
was the frontline heading of the Independent newspaper in the
The story was in response to BP's claim the day
before, when it released its BP Statistical Review of World Energy 2007, "that the
world still has enough 'proven' reserves to provide 40 years of consumption at
current rates". The story was also picked up by Radio 4 News in the
morning of the 14th, but otherwise the BBC ignored the story. Some of the
credit for the story goes to Jeremy Leggett of SolarCentury
and "Half Gone" fame who put the Independent in ODAC's
direction.
The story was also covered by:
Oil crisis 'to hit in four years' -
Scientists reportedly dispute BP's oil-reserve
forecast - MarketWatch
Oil supplies dwindling quicker than expected,
scientists warn - Hamilton Spectator
Scientists warn that oil will start to run out in four
years' time - Irish Independent,
Scientists warn that oil supplies will start to run
out in four years' time - Belfast Telegraph,
Article: Scientists have criticised a
major review of the world's remaining oil reserves, warning that the end of oil
is coming sooner than governments and oil companies are prepared to admit.
BP's Statistical Review of World Energy, published
yesterday, appears to show that the world still has enough "proven"
reserves to provide 40 years of consumption at current rates. The assessment,
based on officially reported figures, has once again pushed back the estimate
of when the world will run dry.
However, scientists led by the London-based Oil
Depletion Analysis Centre, say that global production of oil is set to peak in
the next four years before entering a steepening
decline which will have massive consequences for the world economy and the way
that we live our lives.
According to "peak oil" theory our
consumption of oil will catch, then outstrip our discovery of new reserves and
we will begin to deplete known reserves.
Colin Campbell, the head of the depletion centre,
said: "It's quite a simple theory and one that any beer drinker
understands. The glass starts full and ends empty and the faster you drink it
the quicker it's gone."
Dr Campbell, is a former chief geologist and
vice-president at a string of oil majors including BP, Shell, Fina, Exxon and ChevronTexaco. He
explains that the peak of regular oil - the cheap and easy to extract stuff -
has already come and gone in 2005. Even when you factor in the more difficult
to extract heavy oil, deep sea reserves, polar regions and liquid taken from
gas, the peak will come as soon as 2011, he says.
This scenario is flatly denied by BP, whose chief
economist Peter Davies has dismissed the arguments of "peak oil"
theorists.
"We don't believe there is an absolute resource
constraint. When peak oil comes, it is just as likely to come from consumption
peaking, perhaps because of climate change policies as from production
peaking."
In recent years the once-considerable gap between
demand and supply has narrowed. Last year that gap all but disappeared. The
consequences of a shortfall would be immense. If consumption begins to exceed
production by even the smallest amount, the price of oil could soar above $100
a barrel. A global recession would follow.
Jeremy Leggett, like Dr Campbell, is a
geologist-turned conservationist whose book Half Gone: Oil, Gas, Hot Air and
the Global Energy Crisis brought " peak oil" theory to a wider
audience. He compares industry and government reluctance to face up to the
impending end of oil, to climate change denial.
"It reminds me of the way no one would listen for
years to scientists warning about global warming," he says. "We were
predicting things pretty much exactly as they have played out. Then as now we
were wondering what it would take to get people to listen."
In 1999,
... In the 1970s
... Two-thirds of the world's oil reserves lie in the
BP's Statistical Review is the most widely used
estimate of world oil reserves but as Dr Campbell points out it is only a
summary of highly political estimates supplied by governments and oil
companies.
As Dr Campbell explains: "When I was the boss of
an oil company I would never tell the truth. It's not part of the game."
**********************************************************************************************************
2a/ Are global market bubbles set to blow?
(BBC News, Thu 14 Jun)
http://news.bbc.co.uk/1/hi/business/6748803.stm
Comment: Quite lengthy for a BBC News
article, gives optimistic/ pessimistic points of view.
Article: There is a strange
fascination in blowing a bubble, when despite your better judgement, you keep
willing it to get bigger regardless of the dangers.
Then, suddenly, the violent pop that leaves you
picking bubblegum off your eyebrows, or crying soapy tears.
For many observers, global markets are getting
dangerously close to such a bursting point.
Until recently, we have been living in a period of low
global interest rates that have let consumers and companies borrow money
cheaply.
That has driven demand for mortgages, let companies
pay increasingly large sums for takeovers, and allowed consumers to spend
freely.
And the results of this credit splurge are hard to
ignore:
The
Commodity prices have been buoyed by strong global
demand, pushing some such as copper to records.
Merger and acquisition activity has taken off, and
private equity firms are now in control of some of the world's biggest brands.
But as the records have continued to tumble, concerns
have kept on mounting...
2b/ We're all doomed? (BBC News [Robert Peston, BBC's business editor], Wed 13 Jun)
http://www.bbc.co.uk/blogs/thereporters/robertpeston/2007/06/were_all_doomed.html
Comment: From the introduction near
the top of the page: “I'm Robert Peston, the BBC's
business editor. This blog is my regular take on the business stories and
issues that matter.”
Article: One of the great, global,
economic forces of our age, which I’ve bored you rigid discussing in this blog,
is that it has been possible to borrow long-term money at relatively low
interest rates.
For the past few years, the impact of these low
long-term interest rates has been visible in a surge in borrowing by
individuals and companies together with the related phenomenon of rising prices
of almost every kind of asset or commodity. Here are just three important
manifestations:
a)
b) share prices, that have increased more-or-less in a
straight line since the spring of 2003;
c) a boom in takeovers of companies, financed by
borrowing, and a great wave of repurchases of shares by companies, again funded
by debt.
Now, a fall in longer term interest rates is simply
the corollary of a rise in the price of certain US Government bonds.
And what has kept the price of those bonds high has
been two trends.
First, the accumulation of vast foreign exchange
reserves by
Second, a decision taken some years ago by large
insurers and pension funds to become more risk averse, and reduce their
exposure to shares while increasing their holdings of bonds.
Now according to analysts, for some years long-term
interest rates have been significantly lower than they should have been on the
basis of their normal historical relationship with short-term interest rates
and the health of the global economy.
Which is why what has been happening over the past few
days is important, though largely unreported outside of specialist financial
publications: there has been a sharp fall in the price of 10-year
This is much more important to all of us than what the
Bank of England does to short-term interest rates.
For example, the rise in these long-term market
interest rates pushes up the price of borrowing for our big banks and building
societies and will probably feed through to the interest rates on new fixed-rate
mortgages.
Which could prick the housing-market bubble.
… But there could in time be a seriously negative
impact on the price of shares. Higher longer term interest rates should
eventually lead to a squeeze in the profits of companies, which would make
shares in those companies less valuable.
The bond-market turmoil and fall of last week may turn
out to be the beginning of the end of the current upswing in in shares, property, you name it, the possible end of an
all-embracing bull market.
And that would mean, to quote Private Fraser, that
"we're all doomed, doomed."
**********************************************************************************************************
3a/ Food prices defy inflation [short video]
(BBC News, June 2007)
Comment: Video, 2 min 43 sec. Good
summary of what is causing inflation in global food prices. There are other
reasons, but the video covers three of the main ones - a combination of weather
e.g. drought in
3b/ Floods and drought send price of wheat soaring
(Financial Times, Fri 15 Jun)
http://www.ft.com/cms/s/bca9a74e-1add-11dc-8bf0-000b5df10621.html
Comment: Expect a lot more food price
articles this summer.
Article: Wheat prices in the
The weather problems come at a time when global wheat
stocks are expected to shrink to a 30-year low.
French wheat futures hit their highest level since the
contract was launched in 1998, rising 4 per cent to €181 before easing back to
€179.25. In
"You had a beautiful wheat crop that was lush and
green that got nailed with frost and now you're getting rain when you're trying
to harvest it," said Jerome Leman, broker at Wellington Commodities.
Fresh concerns have emerged this week about the state
of the
"The world is approaching quite a precarious
situation as far as global agriculture is concerned," says Gavin Maquire of Iowa Grain. "Demand for all agricultural
staples has been rising consistently due to global economic and population
growth and developments in the food-for-fuel sector."
This week, the
Low stocks, weather problems and rising prices have
attracted a flurry of speculative buying.
In Europe, yields have been affected by dry conditions
in Hungary, the Czech Republic, Italy and Greece, and drought in Romania and
Bulgaria.
**********************************************************************************************************
4a/ BG urges different oil, gas taxation off
Comment: OGJ article - will be freely
available for only one week.
With
Article: Energy companies developing
gas reserves in the UK North Sea should have a different tax regime than those
developing oil, a senior executive from BG Group PLC urged at a meeting in
Chris Cox, vice-president for
Uncertainties in demand may compromise the development
of gas fields on the
"Many gas discoveries will remain undeveloped
without SCT relief or volume or time allowances for new fields," Cox
warned at an Oil & Gas UK meeting looking at major policy issues for the
UKCS.
According to the recently published UK White Energy
Paper, the gas share of
Cox stressed that it is possible to reconcile the
interests of the
"The treasury is concerned about deadweight
costs," he said. "They are scared that they might subsidize
developments that would go ahead anyway if they gave it a tax break. If more
developments went ahead, the government's take could go up; we've got to pitch
it right."
Cox said there was scope to introduce a voluntary code
to drive development timing and added that the fallow initiative—which
encourages operators drill or surrender licenses on which no significant
activity has occurred for 4 years—does not help with rapid development of new discoveries.
Company misalignment and complex joint ventures are also jeopardizing new
developments in the UK North Sea.
"Resource constraints and competition for funds
lead to partner misalignment on development scenarios and timing," he
said.
BG Group plans to drill seven exploration or appraisal
wells this year.
4b/ Shell and ExxonMobil scale down
Comment: Some how or other the
sentences “Shell has also scrapped plans for a new building on its campus
outside Aberdeen.” and “Shell insisted it was still committed to the North Sea”
just don’t seem to flow. Note that the UK, according to the just published BP Statistical Review of World Energy 2007, had the third
highest rate of oil depletion the world last year, after Turkmenistan and Chad
(ThisIsMoney, item 4c, also states UK has the third highest rate, after Norway
and Saudi Arabia!). The Buzzard field will delay depletion for one year, 2007,
no more.
Article: North Sea oil fields
producing about 54,000 barrels a day have been put up for sale by Royal Dutch
Shell and ExxonMobil, in the latest move by the big oil companies to scale down
their presence in the region.
Shell has also scrapped plans for a new building on
its campus outside
The
… Shell insisted it was still committed to the North
Sea, and highlighted its £350minvestment in the
4c/
http://www.thisismoney.co.uk/investing-and-markets/article.html?in_article_id=421283&in_page_id=3
Comment: ThisIsMoney interprets the
BP's Statistical Review of World Energy as giving a bleak view of future
Article:
The
Despite major finds such as the Buzzard field, the
outlook here is one of steady decline, with costs spiralling and yields
sliding, the firm warned.
BP chief economist Peter Davies said: 'The industry is
now focusing on the potential to maximise recovery for the twilight years of
the resource base. We are not going to stop producing oil and gas in the
The analysis will make grim reading for the
Chancellor, Gordon Brown, who saw dramatic shortfalls in oil tax revenues last
year - despite high world prices and hikes in levies on producers.
The new figures will also exacerbate broader concerns
about the resilience of the British economy, which is heavily dependent on its
oil industry to prop up the ballooning trade deficit.
The gap between imports and exports narrowed to £6.3bn
in April, the lowest since October 2005, thanks largely to an 18% jump in the
amount oil sold abroad, the Office for National Statistics reported yesterday.
Trisha O'Reilly, of lobby group Oil & Gas UK, said
output should improve this year, adding that the
'The issue is how we can slow that rate of decline by
attracting investment needed for exploration and new projects,' she said.
4d/ SHOCK AS SHELL PUTS OIL ASSETS UP FOR
Comment: The Aberdeen P&J takes a
very dim view of Shell’s actions.
Article: Energy giant Shell's
long-term commitment to the north-east was questioned last night after it put a
swathe of its
The scale of the announcement, which will affect
around 8% of Shell's daily oil output from the
But fears over the future of hundreds of jobs were
mixed with optimism that the sale could prompt new operators to move in and
extend the life of the maturing basin.
There was, however, widespread dismay at the firm's
decision to axe plans for a landmark new office complex earmarked for its
campus at Tullos in
Shell said the new building, which was intended to
bring all of its
... Jake Molloy, general secretary of the OILC union,
said yesterday that including contractors, at least 1,000 jobs were directly
affected by the asset sale.
He added: "This move does not look like a
commitment to the
Graham Tran, regional organiser in
... The assets being disposed of include operated
interests in the Cormorant Alpha, Cormorant North, Tern, Eider, Kestrel and Pelican installations and non-operated stakes in Otter and
The sale includes acreage, production licences and
associated infrastructure, and accounts for around 27,200 barrels oil
equivalent per day (boe/d) out of Shell's 350,000 boe/d output...
**********************************************************************************************************
5/ Petrol problems about peak oil, not snake oil
(The Age [
Comment: Bruce Robinson, Convenor of
ASPO-Australia, writes: “A bit of a coup in The Age today. Ken Davidson has put
out a strong piece explaining that high petrol prices are the result of
pressure on oil supply, not price gouging.”
It looks like the Australian government is pursuing
the same daft policies as the
Spring
Street is the Central Business District of Melbourne.
Article: It's time for
IF YOU think petrol is expensive at $1.34 a litre, how
will you feel if it is around $2.60 a litre without any adjustment for
inflation by 2015? That is when
It is not a question that seems to have lodged in the
collective brain of politicians in
The real reason petrol prices are high is because
crude oil is $74 a barrel compared to $35 a barrel in 2004. The price of crude
is high because world demand is beginning to outstrip supply. World discovery
of oil peaked in 1964 and has been declining ever since. The most likely
production scenario is for an annual decline in world production of 2 to 3 per
cent, so that world oil production will fall to about 1990 levels by 2020. In
According to the Australian Association for the Study
of Peak Oil and Gas: "High prices are the market signal that we urgently
need transport and city planning that will reduce our oil dependence.
Suggesting that high oil prices are temporary misleads the public and allows
governments to delay difficult decisions."
The Victorian political and business establishment is
in denial. The case against the east-west link in particular, and increased oil
dependence in general, is made in the submission by the Institute for Sensible
Transport (IST) to Sir Rod Eddington's inquiry into
the tunnel link.
IST argues that outer suburban communities, with poor
access to rail and bicycle infrastructure, are likely to be hardest hit by
petrol price rises. The submission develops a number of inter-related themes:
"Reduced car use … reduces congestion, lowers fuel bills, reduces
emissions and encourages physical activity.
The policies the IST supports include major rail
extensions in the outer suburbs, expanding the bicycle network and connecting
it to train stations, congestion pricing to discourage car use in the CBD,
high-occupancy vehicle lanes on freeways and elimination of the Fringe Benefit
Tax for motor vehicles that subsidises 40 per cent of peak-hour car travel.
… Instead, Melburnians are
being set up for a multibillion-dollar tollway
connecting the Eastern Freeway to the western suburbs, even though an
independent inquiry rejected a similar proposal in 2003. The key question posed
by the Eddington inquiry is how this will be financed
if cost recovery requires tolls higher than motorists are willing to pay.
The answer — public subsidies — is contained in the
submission by ABN AMRO, which hopes to be the successful banker to the deal.
The position is put more succinctly in a study by Ernst & Young, also a
player in the highly lucrative business of setting up PPPs:
"Politically acceptable car toll levels (no more than $4 to $5 in today's
money) will result in these 'next generation' projects requiring significant
public sector subsidies or 'contributions' to make them viable under the PPP
model. The days of self-funded toll roads are over."
If PPP tollways can't pay
for themselves, that should be the end of it, especially as the tunnel offers
no enduring solution to congestion, unlike the cost-free rail option…
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6/
6a/ New Low Cost Air Carrier Set Up in
http://www.fcinfo.ru/themes/basic/materials-rfcm-index.asp?folder=3352
Comment: The Russian economy is
booming. This is the second low cost carrier set up in
Article: The newly established low-cost air
carrier company, A1, is looking for a base airport in the Moscow Region to make
domestic flights and has had negotiations with two airports, Vnukovo and Domodedovo…
6b/ Half of Gas from Shtokman Field to Be Liquefied
(FC Novosti, Fri 15 Jun)
http://www.fcinfo.ru/themes/basic/materials-rfcm-index.asp?folder=3192
Comment: The extended version of the
article states supplies should begin in 2013. Don’t hold your breath. Some
observers think 2015 is too early. C1 + C2 reserves amount to 3.7 trillion cu
m.
Article: Gazprom plans to liquefy half
of the natural gas produced at the Shtokman field and to send the other half to
consumers, said Alexander Ananenkov, deputy chairman
of the Management Committee of the Russian energy giant…
6c/ Russian Gas Supplies to
http://www.fcinfo.ru/themes/basic/materials-rfcm-index.asp?folder=3192
Comment: Surprise, surprise. No
Russian gas for
Article: Russian energy giant Gazprom
has not come to terms with
It is rumoured that the Chinese refused to buy gas at
more than $100 per 1,000 cu m, while Gazprom cannot export gas so cheaply
because in will soon supply gas to the domestic market at $125.
Experts said in this connection that gas supplies to
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7/ Oil demand ‘rising faster than expected’
(Financial Times, Tue 12 Jun)
http://www.ft.com/cms/s/76a4c516-18d6-11dc-a961-000b5df10621,s01=1.html
Comment: “The [IEA] report estimated
that world oil stocks could drop by 1m-1.5m barrels a day in the third quarter”.
The IEA has previously reported that world oil stocks have fallen at about 1
Mb/d for the last two quarters i.e. six months.
Article: World oil demand is rising
faster than previously expected while non-Opec supply
is growing more slowly, the International Energy Agency has said in its latest
monthly assessment of the market.
The rich countries’ energy watchdog warned on Tuesday
of growing tightness in oil supplies in the second half of the year, and urged
the Organisation of the Petrolem Exporting Countries
to raise its output.
David Fyfe, an analyst at the IEA, said: “We would
very much hope that Opec production is at its
seasonal low at the moment... We definitely do need more crude oil.”
The IEA now expects demand for oil to rise by 1.7m
barrels a day this year compared to last year – an increase of about 2 per cent
– and non-Opec oil supply to rise by just 900,000
b/d. That rise in demand is 167,000 b/d more than the IEA had previously
estimated, while the rise in non-Opec supply is 97,000
b/d less.
The report estimated that world oil stocks could drop
by 1m-1.5m barrels a day in the third quarter, which it said “would push
forward stock cover down towards the low levels seen when prices accelerated
higher in 2004. That is, by itself, a concern.”
Opec officials
have played down the possibility of any increase in production before the next
ministerial meeting in
However, speaking to the FT at the beginning of June, Abdalla El-Badri, Opec’s secretary-general, left open the possibility of
raising production later in the year, saying the decision would depend on what
happened to oil stocks.
The IEA report, though viewed by analysts as
supporting the price of oil, failed to prevent it falling during the morning.
At mid-day in
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8/ Boeing forecasts near tripling of air traffic
(Financial Times, Wed 13 Jun)
Comment: You need to log in for full
story. Obviously, Boeing is not just about to announce that its future is
looking bleak because of Peak Oil.
Article: Boeing, the world’s leading
aerospace and defence group, on Wednesday forecast a near tripling of global
air traffic in the next 20 years.
It said that passenger traffic was expected to grow by
5 per cent a year and air cargo by 6.1 per cent a year, despite its growing
concerns about the impact of environmental pressures and inadequate airport and
air traffic control infrastructure on rates of growth in the later part of the
forecast period.
… Airlines have been ordering record numbers of new
aircraft in the last two years, and Boeing forecast on Wednesday that the world
commercial jet fleet would double in the next 20 years from 18,200 in 2006 to
36,400 in 2026.
Such growth would create a market for 28,600 new
commercial passenger and freight aircraft worth $2,800bn in the 20 years.
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