The global oil depletion crisis will last much longer than the current credit crisis, severe as that may be. Credit can be created, and savings can be rebuilt over time. Sadly, oil, created over millions of years, is finite. Oil is a one-time gift that will likely be wrapping up its brief lifespan as an energy source some time late this century. The problems begin, however, when global oil production peaks, and evidence is building that the peak may have occurred in 2005. The average age of the top 20 oil fields in the world is now 59 years.
Oil prices may not rise significantly in 2009, as economies deflate and weaken around the globe. However, temporary demand destruction does not hold even a small candle to permanent supply destruction. To add to the problem, exploration and production around the world is downsizing, as the dramatically lower oil prices make projects uneconomical. Looking at the current 9.1% estimate of global depletion, combined with shrinking levels of drilling and exploration, the medium term outlook is daunting. According to the IEA report, “There remains a real risk that underinvestment will cause an oil supply crunch. The gap now evident between what is being built and what is needed to keep pace with demand is set to widen sharply after 2010.”Looking out longer term, to 2030, the math gets ugly. Current global oil production is 72 million barrels per day. According to Simmons, if the world spends a fortune (many trillions) trying to mitigate the depletion rate, it is estimated global production will fall to 25 million barrels per day by 2030. Without the mitigation, world production will plunge to 9 million barrels per day. If those numbers are not a wake-up call to the world, the coming shortages will certainly provide it.
Simmons has stated that we need to find “four new Saudi Arabia’s” just to keep global production flat in the coming decades. The best geologists in the world with the latest high-tech exploration equipment haven’t been able to find one Saudi Arabia. The chances of them finding multiple super-giant oil fields, and soon, are not overly promising.
Mexico has long relied heavily on Cantarell, the super-giant discovered in 1976, and until recently the world’s second largest oil field. Cantarell is unique in that it formed as a result of a massive meteor that crashed into the ocean off the Yucatan Peninsula over 60 million years ago, forming the Chicxulub crater. This is thought to be the meteor that radically changed the earth’s climate, killing off 75% of the species on earth, including the dinosaurs. Over millions of years, the massive crater eventually produced over 30 billion barrels of oil.
As of May 2005, Cantarell was producing 2.2 million barrels of oil per day (65% of total Mexican production). Today the figure is roughly 900,000 barrels per day. The most troubling aspect is that the decline rate is accelerating, estimated at 2.5% per month currently, or 30% annually.
According to Matt Simmons, by the end of 2009, Mexico will no longer be an oil exporter. If Simmons is correct, it will be very difficult to replace the oil revenue that has supported 40% of the Mexican budget. The Mexican government has recently taken the unprecedented step of voting to allow foreign oil companies to explore for oil in Mexico. In a country that celebrates the 1938 nationalization of its oil industry as a federal holiday, it was clearly an act of desperation. Promising offshore discoveries in Mexico will likely take decades to bring to production, according to Simmons, due to the extreme depths and massive technical challenges.
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The global oil depletion crisis will last much longer than the current credit crisis, severe as that may be. Credit can be created, and savings can be rebuilt over time. Sadly, oil, created over millions of years, is finite. Oil is a one-time gift that will likely be wrapping up its brief lifespan as an energy source some time late this century. The problems begin, however, when global oil production peaks, and evidence is building that the peak may have occurred in 2005. The average age of the top 20 oil fields in the world is now 59 years.
