World running out of oil, says ex-CEO
Jim Buckee warns of $20-a-litre fuel
By Richard Foot, Canwest News Service
January 15, 2009
Consumers shouldn't get too comfortable with cheap gasoline, because the planet is running out of oil and prices will go "sky high" --as high as $20 per litre--as petroleum reserves dwindle in the coming years.
That's the view of Jim Buckee, the British oilman who was CEO of Calgary-based Talisman Energy Inc., one of Canada's largest energy producers, from 1993 to 2007.
Buckee was a controversial figure in Canada, hounded by human-rights activists and investors in the 1990s for helping the rogue government of Sudan exploit its oil reserves.
He is now retired and living in England, but Buckee says society hasn't done enough serious thinking about how to cope with gasoline prices of $10 to $20 a litre.
"Black oil has peaked," he said in telephone interview this week. "The biggest oilfields in the world have been producing for 50 years and they're all getting tired."
He says no giant oilfield, capable of replacing those in Saudi Arabia, Iraq or Kuwait that produce more than half-a-million barrels a day, has been discovered and developed since the 1970s.
That fact, coupled with rising demand means"we're going to need a new Saudi Arabia" to sustain existing reserves into the future.
He calls the current recession a mere "hiccup"on the road to much higher energy prices.
Once it's over, in 18 months or so, he says the pressure on oil supply and demand will "snap back higher, and stronger than before."
Buckee's belief that world petroleum supplies have peaked is not popular in the oil industry. In Newfoundland last year, when Buckee made his case at a convention of offshore oil industry suppliers, delegates greeted his presentation with polite but scant applause.
More popular inside the industry is the notion new extraction technologies and discoveries in unconventional places, such as the Arctic, will replace the world's depleted reserves.
Buckee says it's difficult for executives of the world's biggest oil companies to speak plainly and honestly about the future. For one thing, he says companies such as BP PLC and Exxon- Mobil Corp. are guided by the views of in-house economists, who preach"commodity prices always go down and that ingenuity always beats scarcity--none of which is true."
Discussing peak oil is also just bad for business.
"If Exxon comes out and says, 'Sorry guys, the oil production rate is not going to go up, this is it,' there'd be hell to pay (from investors). So they're better off just zipping their lips."
Senior executives from a number of big companies including Exxon, BP, the Saudi state oil giant Aramco and the Italian oil producer ENI have all condemned in recent years the idea that global oil supplies are dwindling.
"Peak oil supply is still a long way off,"said Michael Daly, vice-president of exploration for BP in 2007. "Exploration and unconventional oil development (plus) additional sources of liquid hydrocarbons means the peak oil argument looks even more misplaced, or at least premature."
But Buckee says the evidence speaks for itself. The population of the world, particularly in emerging economies, continues to grow. Once the recession finishes, demand for petroleum will continue to rise.
At the same time, he says exports from OPEC countries will shrink as their own domestic consumption increases, fuelled by large populations of young people in Saudi Arabia, Iran and Nigeria.
And where will new supplies come from to solve the riddle of rising demand and shrinking reserves?Of the planet's roughly 4,000 oilfields, the 14 biggest account for 20 per cent of the global supply, and all of those were discovered before 1976.
Today all 14 are in decline. During the 1990s, 400 new
oilfields were discovered, but only 2.5 per cent of those are now producing more than 100,000 barrels a day--about the size of the Hibernia oilfield, Canada's largest.
And while a 100,000-barrel-per-day field is a big discovery, it's only a drop in the bucket when compared to the world's daily demand of 80 million barrels.
Buckee says the Alberta oilsands are overrated as a future source of supply, partly because labour problems and environmental challenges such as water use will complicate investment there.
He also says there may be lots of oil in the Arctic, "but can you really envisage another Saudi Arabia--eight million barrels a day--coming from sub-ice wells in such a hostile environment?"
All of which adds up, he says, to a future of steadily falling petroleum supplies and rapidly increasing prices.
"The price at the moment,"says Buckee, "is not sustainable."
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