Half of oil & gas CFOs say we are peaking

Posted on

"Half of oil & gas CFOs say we are peaking"

peak_oil2.jpg

It’s amazing enough that the normally staid International Energy Agency recently said we’ve run out of time (see IEA says oil will peak in 2020). Now Business Wire reports:

According to a new survey by BDO Seidman, LLP, one of the nation’s leading accounting and consulting organizations, 48 percent of chief financial officers (CFOs) at U.S. oil and gas exploration and production companies agree that the world has reached its peak petroleum (liquid hydrocarbon) production rate or will reach it within the next few years, while another 52 percent disagree with that statement.

I think the headline is wrong, though:

Energy CFOs Are Split on World’s Peak Petroleum Production Rate, According to BDO Seidman, LLP.

Chief Financial Officers at exploration and production companies are arguably the most cautious “show me the money” people the entire energy business. The news is not that they are split. The news is that half think we are peaking or soon will.

The point is, it is not just the “peakists” who think we have a big, big problem. And it’s not just the CFO’s. The CEO of Royal Dutch/Shell emailed his employees, “Shell estimates that after 2015 supplies of easy-to-access oil and gas will no longer keep up with demand.” The CEO of French oil company Total S.A., said that production of even 100 million barrels a day by 2030 will be “difficult.” The CEO of ConocoPhillips said, “I don’t think we are going to see the supply going over 100 million barrels a day.”

Remember, the problem is far graver than it appears for one simple reason: Replacing oil in the transportation sector requires strong government action two decades before a peak because of the time needed to replace vehicles and fuel infrastructure. That was the conclusion of a major study funded by the Bush Department of Energy in 2005 on “Peaking of World Oil Production.” The report notes:

The world has never faced a problem like this. Without massive mitigation more than a decade before the fact, the problem will be pervasive and will not be temporary. Previous energy transitions (wood to coal and coal to oil) were gradual and evolutionary; oil peaking will be abrupt and revolutionary.

Ouch! The same point is true about global warming. If we want global carbon dioxide emissions to peak and start declining, the planet must start aggressive mitigation policies two decades in advance — which means now, for the 450 ppm-ers or the 350-ppmers (see “Must-read IEA report explains what must be done to avoid 6°C warming“).

The time to act is now.

Related Posts:

« »

8 Responses to Half of oil & gas CFOs say we are peaking

  1. Russ says:

    I guess these IOCs are in a tough spot.

    They do of course have to face the reality of Peak Oil, but do they want to tell the truth about it or deny it (hitherto the preferred route)?

    On one hand their stock prices and perceived credit-worthiness are so dependent on their claimed reserves and their prospects of discovering more.

    On the other hand, if they want to persist as entities for any length of time through energy descent, they have to come up with a new business paln and sell it.

    And then, the current low prices, almost certainly far too low relative to fundamentals, can’t be helping them any more than it’s helping the nationalized producers. So some of this public change of message may also be an attempt to goose the market by reminding people of supply realities.

  2. David B. Benson says:

    Do I hear a giant sucking sound?

    Or is that a draining sound?

  3. Bob Wright says:

    Shell Oil is trying to reserve water rights to fill and maintain a reservoir in the upper Colorado River watershed. It wants to have Oil Shale extraction on line at some point before peak oil hits. Of course the only problems with that are GHGs, blighting a pristine environment, and ruining everyone’s water from Colorado to Salt Lake City, right on down to California and Mexico (if Mexico still gets any Colorado River water).

    Of course there is proposed coal to oil as a “bridge”. Ha! You don’t build a multibillion dollar plant and turn it off in 10 years. Not to mention having to take a few more mountain tops in W VA, VA, PA, KY, OH…

  4. Ray says:

    Wake up!!! We are here, and have been for 50 years.

  5. jorleh says:

    Coal to liquid, Alberta oil sands…

    Do you know, is Obama going to by oil from Alberta?

  6. Bob Wallace says:

    “…the problem is far graver than it appears for one simple reason: Replacing oil in the transportation sector requires strong government action two decades before a peak because of the time needed to replace vehicles and fuel infrastructure.

    Perhaps, ….

    And that ever popular, perhaps not.

    It seems that 50% of American driving is done using cars that are 5 years or less old.

    Each PHEV that hits the road is expected to use about 25% as much oil as the ICE vehicle that it replaces. If we were to heavily sell PHEVs between now and 2015 (not an unreasonable assumption) we might reduce our personal vehicle oil consumption by a significant amount before peak.

    And remember that commercial vehicles will likely move to PHEVs/BEVs more rapidly than will individuals. Businesses are generally pretty good with math.

    At peak some have calculated a less than 2% drop per year in supply, not a cliff off which we plunge.

    And we already have the infrastructure in place to recharge more PHEVs than we are likely to put in use for the next several years.

    Good batteries and reasonable government support to help get prices down by getting manufacturing levels up and we could see lots of BEVs which would use 0% oil.

  7. “At peak some have calculated a less than 2% drop per year in supply, not a cliff off which we plunge.”

    This is true, but the problem is exacerbated when one considers that the oil producing nations may not want to decrease their consumption in line with their decrease in production. They have growing domestic demand and (rightfully) feel that their populations should be able to benefit from the resource under their soil.

    This means that as their production declines they will maintain their currently growing domestic demand by curtailing exports as necessary.

    So a 2% drop in world production might mean a 3-5% (or more) decline in exports, and importing countries like the U.S. will be faces with a steeper declines in available oil than the actual decline in worldwide production rates.

  8. @ Jorleh

    Prime Minister has said that Obama wants to talk about the Alberta oil sands on his first visit to Canada.

    http://ca.reuters.com/article/topNews/idCATRE50D31220090114

    As you can see, Harper is shameless, using environment and oil sands in the same sentence.