25 Sep 2007
ASPO 6. In Praise of… #3. Ray Leonard.
Ray Leonard of the Kuwait Energy Company was the speaker who, for me, stole the show. He offered, prefaced with a few caveats, insights from within the oil industry, setting out how what the oil industry tells the public and what it actually thinks are very different. One got a sense from listening to Leonard of the degree of profound unease behind closed oil company doors, as year after year they have to downsize their declared reserves and find themselves less and less able to be optimistic.
A clear and accomplished speaker, he spoke of a conference last year called the Hedberg conference where an invited audience from oil companies and bodies like the USGS and the EIA all, in confidence and with no press presence, exchanged their best data, coming up with far more sobering data than had previously been made public. These kind of “I’ll show you mine if you’ll show me yours” sessions were also key in the early stages of the climate change issue, and led, eventually to the formation of the IPCC. In the early stages though, as now with peak oil, those with the actual data preferred a cautious initial approach behind closed doors.
Leonard’s talk was a chilling assessment of the degree of confusion and worry within the oil industry as the real picture begins to emerge. The Hedberg conference looked at three things, the data on growth from exploration, growth from existing reservoirs and growth from unconventional oil resources. The discussions were frank and open, he told the conference, along the lines of “my company says this, but the data says this…”.
As an example, in terms of growth from exploration, he compared the figures of the USGS survey in 2000 with the data generated at the event. The USGS figure, on which much international government complacency on this issue is based, is 700 billion barrels. The figure that emerged from the industry was just 250 billion. He said that although for him that wasn’t a great surprise, it is a confirmation of an emerging trend.
In terms of growth from unconventional oil resources, he was doubtful that the Alberta Tar Sands will be able to produce anything like what they are predicted produce. Limiting factors include the carbon implications of the extraction, the availability of cheap natural gas, and the amount of water it requires. There will be production from Alberta and the other main unconventional resources, Green River Shale in Wyoming and the Venezualan oil sands, he said, but nothing like has been predicted. These unconventional sources will be slow and expensive he said, and will do little to fill the widening gap caused by depletion.
He concluded that we will see a peak rather than a plateau, which will occur at around 95-100 million barrels a day, and in a very high price environment. I was very impressed with Leonard, and with the insights he brought to the conference. It can only be a good sign of things starting to move when someone so respected within the oil industry brings such a stark, yet refreshingly honest, take on where the world is at in terms of how much oil we have left.
25 Sep 8:41pm
Who knows, maybe we’ll have an International Panel on Peak Oil in the next few years …
25 Sep 11:47pm
Rob, I appreciate your comments and have a few clarifications;
1. exploration: to be fair to the USGS, we compared their 2000 report using results up to 2005, plus the USGS did not have a full data base. Still, the lower number should have been obvious for many years. Publishing a higher number may have led to incorrect policy decisions.
2. reserve growth: the Hedberg Conference highlighted that for every barrel found by exploration, there were two barrels found by reserve growth in existing reservoirs. The bad news is that these barrels are higher cost and mainly stem decline rather than incerase production. Furthermore, they are mostly in areas where there is little incentive for the countries to increase production.
3. Plateau vs peak: I actually predict a plateau around 95-100 MMBO/D rather than peak, largely because of the reserve growth potential from existing reservoirs. This could come as early as 2012.
4. The most significantr point for me from the ASPO conference was that two other industry analysts, using separate data bases and different methodologies, came up with similar conclusions. Ray
26 Sep 6:23am
Thanks so much for the clarifications above. As I mentioned in the first ASPO6 post, deciphering my notes, which seemed to make sense at the time, has been a bit of a challenge, so some points inevitably were lost in translation… Thanks again for an excellent presentation.
26 Sep 9:26am
How does this information square with the all liquids plateau at around 85mpd that we seem to have been observing since mid 2005?
Ray Leonard’s estimate of a 95 – 100 mbd plateau presumably only takes into account the geological constraints. Is the apparently lower plateau seen so far because geo-political factors are further constraining production below what is geologically possible?
26 Sep 5:15pm
I’m assuming the production for 95-100 Mb/d max is estimated due to geological constraints under optimum or semi-optimum scenario.
It probably does not take into account the possibility of increasing frequency/likelihood of over-ground problems (politics, terror attacks, refinery mismatch, outright war on Strait of Hormuz, etc).
If Iraq was ‘fixed’ overnight and production ramped up, if Iran was heavily re-invested and local consumption unsubsidized, if Venezuela production problems were dealth with, if, if, if…
I’m of the opinion, based on not somewhat thorough reading of the news, that the error margin on the downside remains much greater than on the upside.
If a lot of over-ground problems are realized, we may never hit 100Mb/d, who knows?
At least the IEA public 120 Mb/d projection looks at this stage more like a fairy tale, but let’s hope things turn for the better over-ground.
26 Sep 5:16pm
He has to appease his employers…
oil+koolaid –> 100 mbpd
26 Sep 7:15pm
My recollection of Ray’s talk, and I’m sure others can confirm, that the 95-100mbpd plateau is for ‘all-liquids’.
Also, Ray’s judgement that the plateau to take place in a “very high price environment” I found to be chilling in its subtlety.
Excellent presentation. Keep up the good work!
27 Sep 12:27am
Hi, Thanks for this report. One quick Q: I was looking at the AAPG site to see if I could find more info about this conference. I found a link to past conference proceedings (http://www.aapg.org/education/hedberg/past/index.cfm) which does not appear to be the one you referred to. It looks like there is a link to a conference w. only the poster sessions presented. Do you know if AAPG is deliberately not publishing proceedings? Or, how I might find out more info? thanks.
27 Sep 1:41am
Cool I was worried that 85 was it. Now I can enjoy Motogp and world superbike for a litle longer.
27 Sep 1:30pm
Did Mr. Leonard’s talk actually attempt to address the main argument of the anti-peakists? Their thesis is that increased oil major investment in R&D in the present high-price environment (or in a future super-high-price environment) will probably lead to new, as yet unimagined extraction tools that would invalidate the peakists’ basic assumptions.
In short, I am curious if Mr. Leonard mentioned how little (or much) the oil majors have been ramping up their tech research spending in this era of huge profits. Too often the two sides of this debate appear to be speaking straight past each other without especially trying to refute each other’s arguments.
27 Sep 10:53pm
Piers Dawson-Damer said: “My recollection of Ray’s talk, and I’m sure others can confirm, that the 95-100mbpd plateau is for ‘all-liquids’.
Also, Ray’s judgement that the plateau to take place in a “very high price environment” I found to be chilling in its subtlety.”
Hi Piers, The OilWatch report (link in my earlier post above) was also referring to all liquids at 85 mbd. (Actuals data from the IEA and EIA)
I understand that the 95 – 100 mbd prediction that Ray Leonard reported was looking purely at the geological limits. If you plug in geo-political constraints that’ll bring the number down a bit. Then if you plug in staff recruitment problems, oil services equipment (rigs etc) shortages, technical problems and other project delays and cost overruns (manifestations of reduced EROI?), I’d guess that you probably come down close to the current 85 mbd for the next few years. So, in the real world, we are looking at a plateau up to 2011 or so, perhaps with a small bump in the middle. Unless the crazies in Washington and Tehran decide otherwise or a hurricane takes out too much critical oil production infrastructure.
The market will continue to push the price up in order to destroy enough demand in the poorest countries to make up for the continuing growth in demand in the richer ones, particularly China.
29 Sep 8:53am
These are intersting coments: Let me address a few of them.
1 Oct 9:26am
Ray, so, taking into account geological constraints and foreseeable above ground factors (projects coming on stream, project delays etc), your view is that we are going to increase production from the current 84-86 mbd to 95-100 mbd by 2012?
Peak Oil Survival » Blog Archive » An insiders view: Ray Leonard of the Kuwait Energy Company
26 May 1:23pm
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