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Saturday, February 17, 2007

Jim Hamilton: Saudi Oil Production Cuts

Jim Hamilton says there's potentially a big story concerning the reasons for Saudi Arabia's cuts in oil production that the press hasn't noticed:

Saudi oil production cuts, by Jim Hamilton: This is a potentially huge story that is not being adequately investigated by the financial press...

Update: A follow-up:

Study sees harmful hunt for extra oil, by Carola Hoyos, Financial Times: All the world’s extra oil supply is likely to come from expensive and environmentally damaging unconventional sources within 15 years, according to a detailed study.

This will mean increasing reliance on hard-to-develop sources of energy such as the Canadian oil sands and Venezuela’s Orinoco tar belt.

A report ... calculates that the world holds 3,600bn barrels of unconventional oil and gas that need a lot of energy to extract. ...

Only 15 per cent of the 3,600bn is heavy and extra-heavy oil, with the rest being even more challenging.

The study makes clear the shift could come sooner than many people in the industry had expected, even though some major conventional oil fields will still be increasing their production in 2020. Those increases will not be enough to offset the decline at other fields.

“It becomes unclear beyond 2020 that conventional oil will be able to meet any of the demand growth,” ... The report added that natural gas products such as liquids and condensate would also become important sources of growth.

The increasing reliance on unconventional oil will require a substantial reshaping of the energy industry. ...

[T]he challenge is huge, said Matthew Simmons, an industry banker who sent shock waves through the oil world when he questioned whether Saudi Arabia, the most important oil source, would be able to continue to expand production.

“The ability to extract this heavy oil in significant volumes is still non-existent,” he said in a recent speech.

“Worse, it takes vast quantities of scarce and valuable potable water and natural gas to turn unusable oil into heavy low-quality oil.” ...

    Posted by on Saturday, February 17, 2007 at 06:02 PM in Economics, Oil | Permalink  TrackBack (0)  Comments (44)

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