The final topic the Gang discussed was the rapid advances in oilfield technology. Sadly, this is the greatest myth of all. I spent four decades as an investment banker to the global oil-service industry, which collectively invented all of this technology. The concept that there are new innovations in this area is false.These ideas may be old, but they are still in the process of being deployed commercially against new reserves, whether deepwater like BP's new Tiber find or onshore unconventional reserves like oil sands and shale oil. To me, the crux of the technology argument is not that a new silver bullet will magically appear on the horizon, but rather that the frontier of existing technology allows us to exploit a wide range of unconventional oil reserves, of whose production potential we have only scratched the surface (e.g. Canada and Venezuela are both estimated to have reserves in oil sands equal to the entire world's reserves of conventional crude). At higher prices, probably, which means lower demand, but not imminent and catastrophic supply shortfall.
In fact, the seeds of this so-called technological revolution -- the ability to exploit oil from deep water or drill horizontally -- were first developed 40 years ago. I personally raised a great deal of the venture capital that helped implement some of the most important technical advances in the industry. Our firm, through advising on mergers, consolidations, reorganizations, and bankruptcies, helped save the oil-service companies that created these great technological advances that help us find and commercially exploit oil and gas.
None of this technology is new -- in fact, it is now quite mature. Sadly, there are few new ideas in the oilfield pipeline to replace advances that were made decades ago.
Oilfield technology is basically good enough
Via Green Sheet, long-time energy investment banker Matthew Simmons doesn't think oilfield technology has much room for improvement (and therefore technological progress is not a good argument against Peak Oil).
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As an exploration geologist I have to agree with you and not Simmons. There is much more to advancing technology than just the capacity to drill horizontally or exploit deepwater. There has been an entire paradigm shift in geologic modeling in the past five to ten years, leading to the recognition of resources that most did not believe were exploitable only 5 years ago (and some still don't believe). With a tightening of oil supply, and rising prices, all sorts of resources will become economically producible, and as competition increases in those resources (like gas shales, oil sands, clathrates, shale oil, oil shales, secondary recovery, etc) there will be a renewed abundance of resources. Enhanced recovery techniques alone could double the existing oil supply if they became economic. Combine that with geothermal potential of old wells and who knows where it could go? Substitution of natural gas for oil already holds significant potential to impact any shortfalls from peak oil. Perhaps Simmons needs to be reminded that when oil replaced whale oil, it was selling for an inflation adjusted price much higher than $150 per barrel. Economics change technology and make its application become more creative and will prevent catastrophic, but not necessarily uncomfortable changes in supply of energy. The New England whaling industry would certainly not describe the changes brought about by learning to refine crude oil into kerosene as comfortable. The whales however are probably thankful.
ReplyDeleteThose are great additional points, Tony. I find your view on enhanced oil recovery particularly interesting - I had no idea it had so much potential.
ReplyDeleteThanks for reading, and for contributing your knowledge in the comments section!!