Drilling Ahead: ‘Peak Oil’ consigned to dustbin of failed notions

By Mike Killalea, editor & publisher

Whatever happened to Peak Oil? Peak Oil, the seemingly irrefutable hypothesis that the world is quickly exhausting its finite hydrocarbon resources, has joined the ranks of the legion of failed apocalyptic theories forecasting the imminent demise of global hydrocarbon supply.

US production has climbed steeply to levels not seen since the 1990s. And in China, discoveries and production of oil and gas, including unconventionals, are up sharply, according to the Chinese newspaper Global Times. According to press reports during late March, coalbed methane production during 2012 soared 24% to 2.57 billion cu meters.

Overall, some 1.5 billion tons (11 billion bbl) oil were discovered in China during 2012, reflecting a 13% increase from 2011, according to government officials quoted in the paper. However, only 270 million tons (2 billion bbl) can be produced with current technologies. 2 billion bbl is not too shabby, though.

The boom in Chinese natural gas is even more startling. New gas discoveries are up fully a third – 33% to 961 billion cu meters, with 500 billion cu meters described as exploitable through current technology.

China’s unconventional reserves could overshadow those of the US by 50%, pending the outcome of ongoing studies, according to Peter Voser, CEO of Royal Dutch Shell.

“We used to ask when we would run out of oil,” remarked Chevron Asia-Pacific E&P president Melody Meyer. “Now we ask when we will run out of technology. Let’s hope not for a long time.”

Mr Voser and Ms Meyer spoke at the International Petroleum Technology Conference (IPTC) in Beijing in March. IADC is a senior endorsing organization for IPTC. China National Petroleum Corp (CNPC) was the host organization and principal sponsor.

However, unconventional development has a way to go, Ms Meyer cautioned.  “Shale gas is in its early exploration phase in most countries outside North America,” she remarked. “It will take time to develop (the necessary) infrastructure.”

Global population growth and economic expansion will continue to pump up energy demand, noted IPTC speaker Mark Albers, ExxonMobil senior vice president.

“Taken together, we predict that energy demand will rise by about 35% by 2040,” he said, adding that this exceeds the current energy demand of Latin America, Russia, India, Africa and the Middle East. While a significant increase, this works out to just 1.3% annually over the 27-year time frame.

Within China alone, the potential prize is huge, as the Middle Kingdom strives to meet its own energy goals. According to Mr Voser, China’s energy consumption could double by 2030, assuming current economic trends.

Natural gas is a key ingredient. CNPC president Zhou Jiping said a “golden age” of natural gas is upon us, calling gas the “most abundant and reliable” fuel. Gas, he added, will in coming years elbow out competing sources to provide 10% of China’s energy needs, up from about 4%.

With irresistable demand growth and increasing reserves to develop, the oil and gas industry may be entering a renaissance. But, agreed senior executives participating in IPTC, a rosy future is possible only if industry can embrace a new paradigm of cooperation and technology, particularly within NOC-dominated markets.

“Strong partnerships will be critical to make the transition to a new energy future,” Shell CEO Voser contended. “No one company can go it alone anymore.”  Mr Voser urged industry to collaborate with government and academia, as well as with companies outside the industry.

Collaboration was a consistent IPTC theme, as international oil companies strove to demonstrate their fitness as partners for national oil companies, particularly with CNPC and other Chinese NOCs.

Noted Saudi Aramco president/CEO Khalid Al-Falih, China is on track to assume the mantle of the world’s largest energy importer. “The best days of our work with China are still to come,” he remarked.