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.