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2005 oil outlook: Is this the year when demand outstrips supply?

2007 writes: Matthew R. Simmons, Chairman and CEO, Simmons & Company International, Houston
...
What this myriad of stories actually represents is part of a far bigger mosaic for what is emerging in global oil markets as 2005 gets underway. It appears that we are entering a new oil era that could bear little resemblance to the behavior of past oil markets.

WorldOil

Posted on Monday, February 28 @ 07:34:20 PST by stu

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Re: 2005 oil outlook: Is this the year when demand outstrips supply? (Score: 1)
by edpeak on Monday, February 28 @ 10:21:18 PST
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intereseting, he puts iraq as past peak...does that
mean he thinks they won't increase even with western
money flooding in huge amounts, past their pre 2003 levels?

Re: 2005 oil outlook: Is this the year when demand outstrips supply? (Score: 1)
by pstarr on Monday, February 28 @ 10:55:51 PST
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I am a complete and green newbie. Given that, I managed to comprehend Simmonâ€™s World Oil article until paragraph 7 and 9. First, in paragraph 7 he says,

â€œThe notion that finding and development (F&D) costs would steadily fall also now seems illusionary. While F&D costs stayed in a $5 to $7 per bbl range throughout the past decade, the total exploration and production capital expenditures rose from a steady $55 billion to $60 billion in the first half of the 1990s to over $124 billion in 2000. The sole reason that F&D costs per bbl stayed low was the rise in reported proven reserves.â€

What I understand Simmons to have just said is that cost per bbl F&D really grew a lot in those years because proven reserves WERE NOT increasing in spite of all the added expenses. He then seems to contradict himself in paragraph 9 when he says,

â€œlower F&D costs might have come primarily through abnormally low drilling and servicing costs, a reduction in the number of appraisal wells drilled, and a substantial decrease in conducting coring analysis and other expensive well testing.â€

Here he seems to be saying that costs were lower because less work was actually done. But then why did he say in the previous paragraph that â€œtotal exploration and production capital expenditures rose from a steady $55 billion to $60 billion in the first half of the 1990s to over $124 billion in 2000â€

Am I completely confusing terminology. I thought that F&D is one component of the total exploration and production capital expenditures. Is that wrong?

I appreciate any help in understanding the crucial information. If this is the wrong place to ask for such help, please move this comment. tnx.

Peter