A dangerous shortfall in the supply of transportation fuels is likely to hit the world soon because demand is rising faster than industry's seeming ability to fill it, several speakers told a globalization forum at the Society of Exploration Geophysicists annual meeting Oct. 11 in Denver.
Industry has shown little exploration and development response to $40-50/bbl oil, even though redevelopment of existing large fields might elicit enough production to stave off a crisis at least temporarily, said Robert Peebler, president and CEO of I/O, a geophysical services firm based in Stafford, Tex.
Modern technology drains oil reservoirs faster and world decline rates are soaring, said Matt Simmons, chairman and CEO of Simmons & Co. International, Houston.
Speakers cited various estimates that world oil consumption will grow to 86 million b/d by the end of 2006, 115 million b/d by 2025, and 178 million b/d by 2060.
We're near the peak
The peak of world oil production is "probably at hand," Simmons said, although no one may know for sure when the peak occurred except in hindsight.
What's worse, he said, the world has no formal "Plan B" to deal with the period following the peak. Coal, for example, is a source of electricity and emissions but not of transportation fuels, and 98% of so-called "stranded gas" has not been drilled and therefore cannot be considered reserves.
The unstated "Plan B" consists of whatever energy bridges can be built to sustain all current energy sources, even in small volumes, until replacements can be developed.
"'It can't make a big difference' is bad thinking," Simmons said. Among the world's immediate needs are the realization that there is no bad energy source, conservation breakthroughs, an environmental-energy treaty, and access to all areas where drilling has been banned.
Where's the spending?
Exploration companies have become too risk averse, spending more money recently on repurchasing their own stock than on exploring for new fields, said Joao Figueira, Petroleo Brasileiro SA executive manager of international E&P.
Only a small portion of cash flow is finding its way into the geophysical industry, said Robert Brunck, chairman and president, Cie. Generale de Geophysique. The combined revenues of ExxonMobil Corp., Royal Dutch/Shell Group, BP PLC, and Total SA are $720 billion, whereas the combined revenues of geophysical giants CGG, Petroluem Geo-Services ASA, and Veritas DGC Inc. total $3.3 billion, Brunck noted.
Still, it is not impossible to see how companies conditioned to oil and gas price volatility have been slow to turn recent huge cash flows into new production, Peebler said. Many companies have been conditioned to price collapse.
Also, the amount of prospective acreage being offered worldwide is shrinking, and most discoveries of recent years are medium to small, Figueira noted.
But Peebler said a study of redevelopment opportunities in 470 large fields indicates that the geology will support an echelon of new production sufficiently large to take care of the supply shortfall that appears likely by 2015.
Meeting the challenge
Geophysical companies have the challenge to help operators discover new reserves, increase recovery factors, image reservoirs, and monitor their production, said Brunck.
Linkage of geology and engineering with geophysics is growing, said Robert A. Gistri, manager, new business identification, business development, ExxonMobil Exploration Co. Geoscience disciplines have developed to the point where sophisticated exploration organizations use highly integrated hydrocarbon systems analysis and understand basins and plays from (tectonic) plate to pore.
In heeding the warnings of the 1990s of a "brain drain" of people from exploration organizations, BP Exploration & Production Technology is renewing its work force so that workers with fewer than 2 years' tenure are capable of delivering exploration prospects, said Peter Carragher, BP head of discipline, worldwide exploration.
Peebler said geophysicists need to get closer to reservoir engineers to help improve recovery factors and help develop better risk portfolios to manage the reservoirs.
Production engineers, he said, need to get more comfortable with the idea of failed projects or unexpected results.
