Seven Questions  

Foreign Policy has a good interview with Matt Simmons called "Seven Questions: The Future of Oil" - its worth reading the whole thing. I love his answer to the final question on the country best positioned to handle the post peak world - Papua New Guinea.

FOREIGN POLICY: Cambridge Energy Research Associates (CERA) estimates that by 2010, production capacity could grow from 85 million barrels per day (bpd) to 101 million bpd, and that "peak oil" won't happen before 2020.

Matthew Simmons: CERA identifies 30 new fields with specific dates and production targets, and 10 with fuzzy numbers. The 30 specific fields yield 40 percent of the 16.4 million bpd boost that they are projecting. The study also doesn't account for the decline in the existing production base. The annual rate of decline of existing fields—there aren't good data on this—is around 5 percent. If we take that into account, even adding 16.4 million bpd by 2010 doesn't make up for the depletion of existing fields. Many energy economists believe that ingenuity and technology will ensure that we will have cheap energy. But there is nothing on the drawing board that we know of that can do that. As an investment banker, I know you usually can't raise very much money for highly optimistic projections.

Peak oil does not mean "running out"; it means that production peaks and starts to decline. I think there's a strong possibility that 10 years from now, we'll be producing 75 million bpd, down from about 85 million bpd today. That doesn't mean that we've run out. But it is a cataclysmic event unless we gear up and understand what it's all about.

FP: What makes you think some fields are in for a production collapse?

MS: The faster you extract oil from a reservoir, the faster you dissipate the reservoir pressure. Once you get below a certain level of pressure, you have to get oil out using an artificial lift or water injection, and some oil will be trapped in the reservoir.

Overproduction leads to production collapse. The Brent field in the North Sea for instance, came on line in 1976 and peaked at 500,000 bpd in the early 1980s. I think that field now produces around 30,000 bpd. Take the Yibal field in Oman. Shell was so convinced that modern technology was a production miracle that it increased the production facilities at Yibal by 30 percent. And just as that happened, the field peaked at 225,000 bpd in 1997, and by 2003, it was down to about 80,000 bpd. When I talk about production collapse, I'm not talking about a drop of 5 or 10 percent.