It was while probing a bit deeper into ‘future oil’ that Slugcatcher spent some sleepless nights contemplating what the question really means.
Geologically, the answer seems to be ever-more remote and deep locations as it becomes clearer that currently known exploration technology has reached a limit and that the rate of discovery has dropped away spectacularly.
Geographically, there seems no doubt that opening the Middle East and probing deeper into Russia is the only onshore hope for oil, with frontier offshore work in places like west (and possibly east) Africa offering some optimism.
But, going down the exploration road limits your view of the ‘future oil’ question as it skips lightly over the way corporations are observing the scene. Right now a string of oil majors are asking this very question, and all are getting the same non-answers from exploration. Soon they will have to buy the reserves they need to stay in business. In other words, takeover time gets ever nearer.
It was at this point that The Slug discovered a remarkably bullish report on Apache Oil in the latest edition of US magazine BusinessWeek. According to the analysis, Apache has outshone the majors through its fast decision making, willingness to take risks, and by being prepared to accelerate oil production. In one extraordinary comment, it is even noted that Apache is happy to start drilling even before it finishes its seismic work.
Apache, according to BusinessWeek, is the leading member of the so-called Independents in the US oil patch, a group not (yet) aligned with the super-majors such as Shell, Chevron, BP and ExxonMobil.
But – and this is the corporate view of future oil – if the independents are being more successful than the super-majors, then surely they are doomed to be acquired as the reality of diminishing oil supplies becomes more of a problem every day.
On the political side of future oil there was a useful weekend glimpse into the crisis confronting Indonesia, an oil-rich country that has done its best to frighten off investors. According to a report in Saturday’s Jakarta Post, Indonesia will soon be forcing operators of liquefied natural gas (LNG) projects to make a 10% cut in their exports. Why? Because a lack of exploration has failed to expand the country’s gas reserves, and what’s left is needed to make fertiliser.
Indonesia’s gas crisis is Australia’s win because Australia is proposing to offer greater tax incentives for oil and gas exploration and has a vast array of deposits waiting for development decisions.
But, it was the latest edition of Petroleum Intelligence Weekly that really had The Slug jumping about future oil. The publication contained some astonishingly sobering numbers on just how unsuccessful oil exploration really has been over the past five years.
According to PIW, a consultancy called IHS Energy has calculated that the oil industry discovered 42.9 billion barrels of oil equivalent in 2000 (and remember that we use close to 30 billion a year), 15.1 billion barrels in 2002 and 13 billion barrels in 2004.
The biggest discoveries so far this year include Woodside’s Pluto field on the North West Shelf, Shell’s Onyx in offshore Norway and Daewoo’s Shwe Phyu play off Burma (Myanmar). Of equal interest was the high level of deepwater dusters in Mauritania, Morocco, Nigeria and Equatorial Guinea.
Falling rates of discovery are just one part of the future oil equation. That is the stuff that has politicians ringing their hands. To people like The Slug, and a few corporate barons in the super-majors, the question of future oil, coupled with booming profits from a price at $US60 a barrel, means just one thing – its takeover time, and big successful independents such as Apache and Woodside are in the cross hairs.
