[Marxism] Recent Al Jazeera Articles on Declining World Oil Reserves

Tony Abdo gojack10 at hotmail.com
Thu Aug 26 13:21:35 MDT 2004


First signs of a global decline in oil?
By Adam Porter
Wednesday 25 August 2004
Many producers not only can not expand, they are in decline

New statistics are claiming that oil production in 18 producer countries has 
passed its peak and is declining faster than previously thought: At about 
1.14 million barrels a day.

As oil prices bounce around the $45 mark one of the main factors 
underpinning the price rise is the increasingly popular notion of oil 
''depletion''.

This is the idea that certain countries' reserves of oil have fallen to such 
low levels that they can no longer produce at the volumes they once did.

British trade journal Petroleum Review has reviewed the 2003 Statistical 
Review of World Energy, put together by British Petroleum, to look for signs 
of depletion.

Its study claims that a large group of producer countries are now in decline 
- putting even more pressure on those countries who have spare production 
capacity.

There are several worrying aspects to this decline. The first is that added 
to the current increase in global demand, it means other countries must 
produce more just for the market to stay still.

Secondly, as those countries are forced to produce to their capacity, it 
only hastens the day when they too will have declining output.

Depletion speeding up

"The phenomenon of multiple counties all declining is a new one for 
everybody... So, in the longer term, matching demand to the new capacity of 
producer countries may prove to be a very tough call"

Chris Skrebowski,
Petroleum Review editor

"What surprised me was the rate of decline among the 18 countries whose 
production is going down," Petroleum Review editor and oil analyst Chris 
Skrebowski told Aljazeera.

"For fourteen out of the eighteen countries the rate of depletion is 
speeding up. This has confounded a long held view that decline was a slow, 
gradual process.

"The first country to start to decline was the USA. It could be possible 
that because they have such a high skill base, so many wells and such cheap 
capital that they were able to slow their rate of depletion. Other countries 
cannot," he said.

Those 18 countries in decline amount to about 25% of the world's producers. 
They are losing about 1.14 million bpd.

This means that the other 75% have to increase output. Not only to add the 
extra barrels lost by the declining countries, but also to meet leaping 
global demand, about 2.4 million bpd in 2004.

That demand is set to continue its increase, forecast by the International 
Energy Agency to grow by another 1.8 million bpd in 2005.

"It's a crazy see-saw where the fulcrum, the pivot, is constantly moving 
across. Eventually it is going to get to a point where the see-saw can no 
longer balance," said Skrebowski.

Sudden decline

Another problem analysts are facing is that it appears countries can carry 
on expanding production until suddenly the decline sets in, never to be 
reversed.


Depletion could eventually make
current high prices seem cheap

"The UK expanded production each year until 1999," Skrebowski continues. 
"Since then it has gone down every year by 5%, then 6% then 8% and this 
year, 2004, it looks set to be higher. This is even with the best 
technologies and techniques available."

The country with the biggest rate of decline is Gabon. The impoverished west 
African state experienced an 18% drop in production year on year.

This is on a set of fields who only came on the market in the 1970s, having 
been developed by the French oil companies. Such a rate of decline could 
spell disaster for vulnerable African economies.

Geo-political factors

Of course these are the most obvious examples of depletion. The more 
intangible effects are geo-political.

"Depletion is not very exciting or special if it is just in one country, say 
the west of country X is going down but the east is going up. No one really 
cares about that except those directly involved.

"If, however, it is going down in 'stable' country X and up in 'unstable' 
country Y, then you get the geo-political dimension. What happens if 
declines in safe countries can only be offset by increases from those less 
secure?" Skrebowski asks.

Because that is exactly what may be happening. For example Petrologistics, 
an oil industry firm which tracks tanker shipments, reported that Saudi 
Arabian output actually fell by 400,000 bpd last month.

No more room

"It's a crazy see-saw where the fulcrum, the pivot, is constantly moving 
across. Eventually it is going to get to a point where the see-saw can no 
longer balance"

Skrebowski, on demand and supply

"There are serious questions being raised about the ability of Saudi Arabia 
to expand production. Plus places like Abu Dhabi and Kuwait have little or 
no room for movement as well. And you don't need very many large producers 
to peak to make things very difficult for the others," said Skrebowski.

"As well as the 18 in decline there are many others who have no further room 
to expand production by any significant amount. Mexico has some problems 
with expanding any further and they do not appear to have invested in any 
new exploration whilst China's figures claim they are still just increasing 
capacity. Yet at the same time even they have admitted their two main fields 
are in decline."

Without gigantic and costly investment, that would itself inflate prices, 
squeezing more oil out of the ground may prove hard. Petroleum Review's 
rigorous statistical analysis may just be the prologue to a bigger, more 
unsettling story.

"The phenomenon of multiple counties all declining is a new one for 
everybody. Up to 1990 only the USA and Romania had started declining. So, in 
the longer term, matching demand to the new capacity of producer countries 
may prove to be a very tough call, a very tough call indeed," predicted 
Skrebowski.

And that may prove to be an understatement.

Other very interesting articles...
http://english.aljazeera.net/NR/exeres/8AEF2417-CBDF-4E99-A8D2-CAA5409C147E.htm
http://english.aljazeera.net/NR/exeres/416F7BA6-90FC-48E6-8F4C-CA30FDD6EB39.htm

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