The Chair of BP is quoted by Reuters (below) saying that the recent Russian tax reduction on oil companies will lead to production increases in “a year or two.”  Which often means three or four.  In my view the reality is that Russian production can increase if Mr. Putin wants it to do so.  The new tax reduction still leaves a very high tax rate in place.   It is not clear what Mr. Putin truly wishes, but it seems geologically possible that Russia can increase production if it so desires …

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We can add Indonesia to the list of major oil fields in rapid decline.  The list is headed by Mexico’s giant Cantarell field and by the North Sea.  Apparently political mismanagement is a factor in Indonesia’s inability to attract foreign capital and expertise to try to find new reserves.
Indonesia warns oil output to finish in 10 years’ time
JAKARTA: Indonesia’s oil watchdog, BPMIGAS, warned on Friday that the country’s dwindling oil reserves could be exhausted in 10 years’ time if no new reserves are found.
Indonesia has struggled to develop its rich …

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I’m a rich environmentalist who thinks the green movement often goes too far.  So I’m happy to see that advocates for the poor are starting to put their oars in the water to limit the influence of the environmental lobby.  Clearly higher oil prices hurt the poor disproportionately.  Now the poor are fighting policies that may raise oil prices. Take ANWR as an example.  If there are any environmentalists who actually go to northern Alaska to enjoy the natural beauty, you can bet they are wealthy.  People living in the …

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I strongly recommend the following report from the 7/30/08 Financial Times in its entirety to serious oil supply students, but I will offer the following summarizing comment: According to the CEO of Schlumberger, a serious shortage of personnel trained to operate sophisticated oil drilling equipment, caused by two decades of low oil prices, will severely limit the ability of the industry to expand oil production.  It takes ten years to turn out a fully trained deep ocean drilling technician, apparently. A key element of the problem is that …

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Production in Nigeria declined slightly in ‘07 from ‘06 - about 110 kb/d, but it is off about 500 kb/d in ‘08 vs. ‘07.  Clearly the MEND and other criminal/protest forces are gaining the upper hand.

In a sense, Nigeria has really become the world’s “swing producer”.   The tightness of global oil supplies hinges as much on whether the Nigerian government can get control of its country as whether the Saudis increase their production or not.

Here is a recent report from Bloomberg

July 28, 2008, 9:33AM
Nigeria to ramp up oil exports by …

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The International Energy Agency based in Paris is conducting a study of the conditions of the oil fields of the major oil producing nations - I believe the first of its kind by a respected national or international agency.   Among other things it will try to assess decline rates of existing fields and the projecte the adequacy of new supplies expected to come on the market. The study is expected to be released in November.   In the meantime the  well respected analyst leading the study, Fatih Birol, has released an …

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According to this report from Bloomberg,  a European consultancy says that OPEC’s recent forecast of 2008 non-OPEC oil production is well in excess of reality.  It recommends that OPEC raise production (as if) and lower the prices it is demanding  for its excess heavy sour crude so as to be appealing to the market.  The implication is that OPEC is trying to keep oil prices high.  You think?  We are starting to get low enough prices that we may find out, particularly if they fall another $10 …

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Pemex announced another substantial year over year drop in oil production from its huge Cantarell field in June.   June production was 1.017 mb/d, compared with 1.038 mb/d in May  and 1.074 mb/d in April, but it was 35% less than June, 2007.  This is reported to be the fastest decline rate in 12 years. Total Mexican oil production in June dropped 11.4%  from June, 2007 to 2.838 mb/d which compares favorably with May’s 2.79 mb/d.  The monthly increase is due to the fact that, “The company …

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Recently the CEO of Gazprom predicted oil will sell for $250 in the near future as described below.  An analysis of that idea from a former Bank of America person leads him to conclude that the recent oil run up to $147 is a bubble that will burst and that the oil price will stay low for five years.  OK, everyone is entitled to his opinion.   To me, the Russian prediction led to my thinking about what conditions have caused and may in the future cause a sustained …

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Someone recently said, “Oil shale is the energy source of the future and it always will be.”   There is huge opposition to authorizing shale development among locals in the Western states that are effected.  And so far there is no proven technology that is economical.  Moreover, if the anticipated oil shortage will be most severe in the 2011 - 2020 period, it does not appear from the report posted below that oil shale could possibly be relevant during that time frame.  Here it is:
Squeezing Oil From a Stone
Energy …

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The following report from the Financial Times (7/2/08) describes a dire forecast by the International Energy Agency that for the first time in history non-Opec countries will hardly be able to raise production at all during the next five years.   This forecast adds color to the recent megaprojects forecast of global production expected from all new fields going out to 2015.  The analysis is certainly consistent with recently noted high decline rates in the North Sea and Mexico, plus indications of declining production in the …

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I own some Gazprom Neft because I believe truly and sincerely that the government of Russia (P.O. Box Putin) has determined that Gazprom and its oil subsidiary, Gazprom Neft, will dominate and control, respectively, the oil and gas business in Russia.   And, incidentally, that Russia in turn will, if at all possible, dominate and control the oil and gas supply of Europe and the greater world at some point.  This has already happened for the most part with respect to natural gas.  The oil part will take a lot …

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Is it a criminal gang or a criminal government?  And if the stolen oil is on the market, has Nigerian crude production really been reduced as much as claimed? And, then…if Nigerian crude has been reduced less than has been reported to the market is the impact of Nigeria’s oil problem partly  “psychological”?

Here’s the story from the BBC:

Nigeria seeks to end ‘blood oil’

Stealing crude oil requires government cover, activists say

An international cartel of oil smugglers steals billions of dollars …

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Cantarell’s declining production trend continued in May as was first reported on June 26th.  But the press seems to have done a double-take on the seriousness of the problem more recently noting that May production was down by more than one third compared with year ago levels.   The following piece from the Financial Times is representative:   Output plummets at huge Mexican oilfield By Adam Thomson in Mexico City Published: July 8 2008 00:35 | Last updated: July 8 2008 00:35 Production at Mexico’s Cantarell oil complex, …

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Here is a comprehensive essay on the history of oil prices and a reasonable attempt to forecast them.   It come from The Oil Drum’s Australian Bureau.  Readers will find a number of similarities to my recent essay in Newsletter #16.  But it covers some additional ground using only a few well chosen charts.  I cannot recommend strongly enough that you read it. One of the interesting assertions in it is a Goldman Sachs estimate that current oil prices have reduced global oil demand by 5 …

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