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Quick jump to below stories:
Current Events
Bush budget has no money to buy emergency SPR oil
Oil industry disputes proposed budget trim
North Sea Production Slump Casts Doubt on Government Figures
Sweden plans to be world's first oil-free economy

[Kenneth Deffeyes of Princeton is the first to give us numbers showing that planet Earth has passed peak oil production. This would be consistent with FTW’s analysis saying that we were at peak, plus or minus six months as of last fall. If Deffeyes is correct then total world oil production will never surpass what was being pumped last December. That won’t be hard to verify. If Deffeyes is wrong he will not be off by much.

As this distinguished colleague of M. King Hubbert has observed, his career as a prophet is over and his career as a historian has begun. For the rest of us alarm bells should be going off everywhere. I agree with Deffeyes that planet earth will be back in the Stone Age, or well past the halfway point there, by 2025. For all of us, the sense of urgency must be doubled now. There is precious little time to waste. – MCR]

Current Events

February 11, 2006
Kenneth Deffeyes
http://www.princeton.edu/hubbert/current-events.html

(In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.)

In the January 2004 Current Events on this web site, I predicted that world oil production would peak on Thanksgiving Day, November 24, 2005. In hindsight, that prediction was in error by three weeks. An update using the 2005 data shows that we passed the peak on December 16, 2005.

"A decent respect to the opinions of mankind requires" that I present an update on the data sources and the interpretation.

The underlying methodology is Hubbert's postulate that the rate of new oil discoveries depends on the fraction of the oil that has not yet been discovered. Similarly, the rate of oil production depends on the fraction of oil that has not yet been produced. A test of Hubbert's hypothesis, using the long history of US oil production, is on pages 35—42 of my book Beyond Oil. An algebraic result from the Hubbert theory says that the production rate peaks when half of the oil has been produced.

The most accurate measure of the eventual total oil comes from the "hits" graph on page 48 of Beyond Oil. The input data for that graph are the dates of the first well in each oilfield. The February 2006 edition of Colin Campbell's ASPO newsletter contains his updated version of the ExxonMobil discovery dates. I enlarged Campbell's graph and scaled off data for 2004 and 2005. An update of the calculation reported on page 49 of Beyond Oil gives an unchanged estimate: 2.013 trillion barrels. (There is always a statistical nervousness when an estimate does not change. I make the estimates by stepwise trials, and the winning step was 2.013. What I know is that neither estimate was 2.012 or 2.014.)

The world peak would then happen when 1.0065 trillion barrels have been produced (half of 2.013). Following Hubbert, I used the Oil & Gas Journal end-of-year production numbers. It isn't that the Oil & Gas Journal reports are divinely inspired; their methodology is well explained and their reports constitute a relatively consistent data set. The cumulative world production at the end of 2004 was 0.9812 trillion barrels and at the end of 2005 it was 1.00748 trillion. During the year, we passed the halfway point. The graph shows the date of the crossover: December 16, 2005.

During the year, we passed the halfway point. The graph shows the date of the crossover: December 16, 2005.

There are some interesting additional bits in the end-of-year statistics. Compared to 2004, world oil production was up 0.8 percent in 2005, nowhere near enough to compensate for a demand rise of roughly 3 percent. The high prices did not bring much additional oil out of the ground. Most oil-producing countries are in decline. The rise in production was largely from Saudi Arabia, Russia, and Angola. The Saudi production for 2005 was 9.155 million barrels per day. On March 6, 2003 Saudi Aramco and the government of Saudi Arabia announced by way of the Dow Jones newswire that they were maxed out at 9.2 barrels per day. In retrospect, that statement seems to be accurate. Further details are in Matthew Simmons' book Twilight in the Desert.

Could some new discovery come along and reverse the global oil decline? The world oil industry is a huge system: Annual production worth 1.7 trillion dollars. I don't see anything on the horizon large enough to turn it around.

So what are the policy implications? Numerous critics are claiming that the present world economic situation is a house of cards: built on trade deficits, housing price bubbles, and barely-adequate natural gas supplies. Pulling any one card out from the bottom of the pile might collapse the whole structure.

There are calls for embargoing Iranian oil because of the nuclear weapons situation. Pulling four million barrels per day out from under the world energy supply might trigger a severe worldwide recession. In the post-peak era, we're playing a new ball game and we don't yet know the rules.

Ghawar, the supergiant Saudi oilfield, is producing increasing amounts of water along with the oil. When Simmons sent Twilight in the Desert to the printer, the water cut at Ghawar was around 30 percent. There are later reports on the Internet (home.entouch.net/dmd/ghawar.htm) of water cuts as high as 55 percent. Ghawar has been producing 4 million barrels per day; when the Ghawar field waters out, you can kiss your lifestyle goodbye.

Since we have passed the peak without initiating major corrective measures, we now have to rely primarily on methods that we have already engineered. Long-term research and development projects, no matter how noble their objectives, have to take a back seat while we deal with the short-term problems. Long-term examples in the proposed 2007 US budget (Feb. 9, 2006 New York Times page A-18) include a 65 percent increase in the programs to produce ethanol from corn, a 25.8 percent increase for developing hydrogen fuel cell cars, and a 78.5 percent increase in spending on solar energy research. The Times reports that solar energy today supplies one percent of US electricity; the hope is to double that to 2 percent by the year 2025. By 2025, we're going to be back in the Stone Age.

By 2025, we're going to be back in the Stone Age.

Ethanol, fuel cells, and solar cells are not the only shimmering dreams. Methane hydrates, oil shale, and the Yucca Mountain radioactive waste depository would be better off forgotten. There are plenty of solid opportunities. Energy conservation is by far the most important. Initiatives that are already engineered and ready to go are biodiesel from palm oil, coal gasification (for both gaseous and liquid fuels), high-efficiency diesel automobiles, and revamping our food supply. Every little bit helps, but even if wind energy continues its success it will still be a little bit.

That's it. I can now refer to the world oil peak in the past tense. My career as a prophet is over. I'm now an historian.

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[This is the situation that FTW warned of immediately after Katrina and Rita. What was taken out of the SPR last fall and winter needs to be replaced and now Congress is calling for an additional 300 million barrels. The all too obvious problem is that with much of the Gulf’s production still impaired, there’s no place in the world to go to get enough oil to meet daily needs, let alone to refill or increase the size of the SPR. That’s why there’s no money allocated for it.

The same can be said of Bush cutting government funds for oil and gas exploration. The administration understands that there’s nothing of significance left to find.

It’s beginning to look as if Peak is arriving sooner rather than later and also like its first cut may be one of the deepest. Is this what’s driving all these March deadlines? -- MCR]

Bush budget has no money to buy emergency SPR oil

Feb 6 2006
Reuters
http://today.reuters.com/investing/financeArticle.aspx?type=
bondsNews&storyID=2006-02-06T181440Z_01_WBT004729_RTRIDST_0
_BUSH-BUDGET-OIL-URGENT.XML

(In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.)

WASHINGTON, Feb 6 (Reuters) - Congress is requiring the Bush administration to add almost 300 million barrels to the U.S. emergency oil stockpile, but the White House on Monday did not seek money to buy the crude in its proposed budget for the 2007 spending year sent to Congress.

In sweeping energy legislation signed into law last year, Congress required the administration to boost capacity of the Strategic Petroleum Reserve to 1 billion barrels from its current 727 million barrels.

The stockpile was created by Congress in 1975 after the Arab oil embargo. It currently holds about 684 million barrels of crude in underground caverns at four sites in Texas and Louisiana.

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Oil industry disputes proposed budget trim

Plan would kill $50 million in federal R&D funding

From Scott Spoerry
CNN
http://www.cnn.com/2006/POLITICS/02/06/budget.oil/index.html

(In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.)

WASHINGTON (CNN) -- Oil drilling companies are upset that the Bush administration has proposed killing funding for oil and natural gas exploration research and development programs at the Department of Energy, an industry lobbyist said Monday.

The proposed cuts were included in the $2.77 trillion budget for the 2007 fiscal year that President Bush presented to Congress on Monday.

The proposed 2007 budget would cut about $61 million from the Energy Department's budget. It proposes eliminating a $50 million-per-year research-and-development program that was authorized in the sweeping Energy Policy Act of 2005, which Bush signed in August.

"Industry has the incentives and resources to do such R&D on its own," said a written statement from the White House Office of Management and Budget.

Additionally, the president has called for more funding toward developing alternative energy sources such as nuclear, solar and cleaner coal technology.

But Mike Linn, chairman of the Independent Petroleum Association of America, counters, "It doesn't make sense to have an Energy Department that doesn't have a portion of its mission directed to America's largest energy resources."

The IPAA, which represents companies that drill most of the oil and gas wells in the United States, said the Bush administration's focus on aiming research dollars toward alternative and cleaner fuels is misguided.

Moreover, Linn said most of the exploration and research money distributed by the department has gone to small, lean exploration companies, not the large integrated oil companies that have been reporting record profits.

Last week, Exxon Mobil Corp., the nation's largest oil company, reported U.S.-record profits for the quarter of $10.7 billion, as well as for the year ($36.1 billion).

The 2007 budget, with a projected deficit of at least $354 billion, would increase spending for the military and homeland security, and hold back money for Medicare and other nondefense programs. (Full story)

The budget proposal also calls for opening Alaska's Arctic National Wildlife Refuge to oil drilling, which Congress has previously rejected.

In his State of the Union address last week, Bush also proposed increased funding for research into ethanol fuels to power vehicles. Ethanol is a cleaner-burning fuel that can be derived from crops such as corn or sugarcane.

"Our goal is to make this new kind of ethanol practical and competitive within six years," he said.

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North Sea Production Slump Casts Doubt on Government Figures

Ian Fraser, Financial Editor
Newsquest Media Group
The Sunday Herald
Monday, February 06, 2006
http://www.rigzone.com/news/article.asp?a_id=29186

(In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.)

A marked downturn in North Sea oil production means that the UK will become a net importer of oil at least three years earlier than the government anticipates, according to new figures from the Royal Bank of Scotland.

Even the contribution from the Buzzard field - which will add about 180,000 barrels of oil per day from 2007 - is seen as insufficient to prevent a looming dependence on the vagaries of world markets.

The Department of Trade & Industry is sticking to its prediction that the UK will not become a net importer of oil on a sustained annual basis until 2010.

However, figures from the RBS Oil & Gas Index show production from the UK continental shelf unexpectedly shrank to 1.5 million barrels per day (bpd) in October, 8-per cent down on the previous month and a 14-per cent fall on October 2004.

Andrew McLaughlin, group chief economist at RBS, said: "The International Energy Agency is predicting UK demand of 1.8 million bpd in 2007. But we'll be lucky to produce an average of 1.7 million bpd in 2005 and it seems unlikely that North Sea production is going to rise above 1.8 million bpd over the next 12 months.

"There had been a hope both in the oil industry and within government that a period of sustained high oil prices would create more incentives to produce in the North Sea. But that has not come through.

"North Sea fields are maturing rapidly and as a result the UK looks set to become a net importer of crude oil earlier than the government is anticipating. Even current high prices will be insufficient to stem the long-term depletion of North Sea fields."

UK crude production peaked at 2.9 million bpd in 1999 but has been in long-term decline ever since. Since 2004, the UK has been a net importer of gas.

RBS's warning follows figures from the International Energy Agency which also suggested the government's sums are wrong. Yet McLaughlin denied a dependence on imported oil, which last happened in 1992, would jeopardise the economy. "Clearly we're going to become more reliant on others, with a need to secure around 200,000 barrels per day of extra oil from world markets, but there's no immediate danger."

The news is likely to come as a blow to Chancellor Gordon Brown, whose decision to levy a windfall tax on North Sea profits prompted oil companies to review their commitment to the region.

Speaking at an RBS oil and gas conference in Aberdeen last month, the BP chief executive Lord Browne attacked the chancellor's move. "If a windfall tax is to be applied when prices go up, the tax should be removed as prices come down." Browne called on the the tax to be removed "immediately" if and when prices fall.

Crude oil prices eased last week after the standoff between Iran and the West over nuclear weapons was offset by a larger- thanexpected gain in US petroleum stocks. The price of Texas crude fell below dollars-65 per barrel for the first time in three weeks after the US said it would not immediately seek sanctions against Iran.

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Sweden plans to be world's first oil-free economy

· 15-year limit set for switch to renewable energy
· Biofuels favoured over further nuclear power

John Vidal, environment editor
Wednesday February 8, 2006
The Guardian
http://www.guardian.co.uk/oil/story/0,,1704954,00.html

(In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.)

Sweden is to take the biggest energy step of any advanced western economy by trying to wean itself off oil completely within 15 years - without building a new generation of nuclear power stations.

The attempt by the country of 9 million people to become the world's first practically oil-free economy is being planned by a committee of industrialists, academics, farmers, car makers, civil servants and others, who will report to parliament in several months.

The intention, the Swedish government said yesterday, is to replace all fossil fuels with renewables before climate change destroys economies and growing oil scarcity leads to huge new price rises.

"Our dependency on oil should be broken by 2020," said Mona Sahlin, minister of sustainable development. "There shall always be better alternatives to oil, which means no house should need oil for heating, and no driver should need to turn solely to gasoline."

According to the energy committee of the Royal Swedish Academy of Sciences, there is growing concern that global oil supplies are peaking and will shortly dwindle, and that a global economic recession could result from high oil prices.

Ms Sahlin has described oil dependency as one of the greatest problems facing the world. "A Sweden free of fossil fuels would give us enormous advantages, not least by reducing the impact from fluctuations in oil prices," she said. "The price of oil has tripled since 1996."

A government official said: "We want to be both mentally and technically prepared for a world without oil. The plan is a response to global climate change, rising petroleum prices and warnings by some experts that the world may soon be running out of oil."

Sweden, which was badly hit by the oil price rises in the 1970s, now gets almost all its electricity from nuclear and hydroelectric power, and relies on fossil fuels mainly for transport. Almost all its heating has been converted in the past decade to schemes which distribute steam or hot water generated by geothermal energy or waste heat. A 1980 referendum decided that nuclear power should be phased out, but this has still not been finalised.

The decision to abandon oil puts Sweden at the top of the world green league table. Iceland hopes by 2050 to power all its cars and boats with hydrogen made from electricity drawn from renewable resources, and Brazil intends to power 80% of its transport fleet with ethanol derived mainly from sugar cane within five years.

Last week George Bush surprised analysts by saying that the US was addicted to oil and should greatly reduce imports from the Middle East. The US now plans a large increase in nuclear power.

The British government, which is committed to generating 10% of its electricity from renewable sources by 2012, last month launched an energy review which has a specific remit to consider a large increase in nuclear power. But a report by accountants Ernst & Young yesterday said that the UK was falling behind in its attempt to meet its renewables target.

"The UK has Europe's best wind, wave and tidal resources yet it continues to miss out on its economic potential," said Jonathan Johns, head of renewable energy at Ernst & Young.

Energy ministry officials in Sweden said they expected the oil committee to recommend further development of biofuels derived from its massive forests, and by expanding other renewable energies such as wind and wave power.

Sweden has a head start over most countries. In 2003, 26% of all the energy consumed came from renewable sources - the EU average is 6%. Only 32% of the energy came from oil - down from 77% in 1970.

The Swedish government is working with carmakers Saab and Volvo to develop cars and lorries that burn ethanol and other biofuels. Last year the Swedish energy agency said it planned to get the public sector to move out of oil. Its health and library services are being given grants to convert from oil use and homeowners are being encouraged with green taxes. The paper and pulp industries use bark to produce energy, and sawmills burn wood chips and sawdust to generate power.

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