IHS Cera’s latest report on oil supply concludes that output is set to grow through 2030, with no peak evident. And while there are doubters out there, who contend oil already has peaked or is in the process of peaking, this latest report on the subject notes that 60 per cent of the more than 1,000 fields examined in detail in the study were found to have production levels that were either steady or climbing.
It is really no surprise to those in the industry, who note that technology continues to open up resources that many were certain were going to have to be left in the ground. Time was when the technology was not there to extract the resources, in many cases, or not to do so economically. But technology advancements are ever-present in the energy industry. Just take a look at the natural gas boom.
Three years ago, the US onshore industry was believed to have 30 years worth of resources at current consumption rates. But new technology and expertise have enabled the industry to extract gas from shale rock – once considered impenetrable – and now the US is believed to have 100 years supply. In the oil patch, the industry is experimenting with new extraction techniques all the time.
This alone is a good enough reason to believe Cera’s conclusion that oil supply is going to continue growing, for the time being. Here is what Cera’s Peter Jackson had to say:
There is more than an adequate inventory of physical resources avaialble to increase supply to meet anticipated levels of demand through 2030. It would be easy to interpret the market and oil price trends from 2003 through 2009 in isolation to support the belief that a peak in global supply has passed or is imminent. But this only illustrates that the market continues to act as the shock absorber of major volatility.
Mr Jackson says how supply plays out is not a question of resource availability. In other words, the crucial issue lies not below ground. It is above ground, in the form of global economic growth, the capability of the upstream oil industry, costs, government policies on access to reserves and taxation, the evolution of renewable alternative energy sources and the effect of climate change issues on policy concerning the use of fossil fuels, according to the report. Mr Jackson sums up:
So much will happen between now and 2030 to affect demand – from changes in the automobile engine and the electric battery to changes in demographics and values. Peak demand may ultimately prove to be the main driver of long-term supply.
Cera could well be right. The way technology and expertise in the oil patch continue to evolve indicates that recoverable resources will only grow. Whether the world finds a way to do without them might be what eventually brings Big Oil’s 100-year run to an end. But something tells me as long as the industry can produce fossil fuels, the world will use them.
Further reading: Is Cera over-optimistic? ‘Time and the latest Cera report’ at Bit Tooth Energy