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In Berlin: Show versus Substance With bottle-brush drilling, when the water table hits the Present in Berlin for the ASPO conference on May 25 and 26 horizontal shaft, often without warning, the whole field is were some newcomers, senior representatives from British virtually dead and production immediately drops off to almost Petroleum, ExxonMobil and the International Energy Agency nothing. As several at the conference noted, this is exactly what (IEA). They came as nobles called to a commoners' court: polite, has already happened in Oman, Syria and Yemen. courteous, but waving their flags just the same, unperturbed by As William Kennedy, a UK observer at the conference, noted the growing mess around them. If nothing else, their presence afterwards: "For the record, Ghawar's ultimate recoverable served as a reminder that Peak Oil was squarely on the table. reserves in 1975 were estimated at 60 billion barrels—by Even from their denials came startling revelations. ExxonMobil, Texaco and Chevron. It had produced 55 billion As the press reports describing a disintegrating world outside barrels up to the end of 2003 and is still producing at 1.8 billion rolled on, the debate inside still seemed removed from it all. It per annum. That shows you how close it might be to the end. felt strange to discuss Peak Oil in a purely data-driven way, while | When Ghawar dies, the world is officially in decline." knowing how utterly it will shatter our growth-driven industrial No one, not even from the major oil companies or the economic civilisation. camp, rose to defend Saudi Arabia's claim that it could increase The big three of ASPO—Colin Campbell, Kjell Aleklett and production rapidly. Jean Laherrére—accompanied by the de facto star of the event, The BBC's Adam Porter ("Is The World's Oil Running Out investment banker Matthew Simmons, had their work cut out for Fast?", BBC News, June 7, 2004) nailed the IEA's Chief them; not with the audience but with those who had come to deny. Economist, Faith Birol, over his confident assertion that there is Natural gas issues facing Europe took up most of the first day. still plenty of oil: Two things quickly became clear on that account. Firstly, almost "In public, Mr Birol denied that supply would not be able to all of Europe, soon even perhaps Ireland, is going to become meet rising demand, especially from the buoyant economies in the dependent upon Russian natural gas to stay warm (Britain has just USA, China and India. become a net gas importer in the face of North Sea decline). "But after his speech, he seemed to change his tune. Secondly, Russia has much less natural gas than the economists "For the time being, there is no spare capacity. But we expect and bookkeepers have predicted. demand to increase by the fourth quarter Simmons asked rhetorically why [of the year] by 3 million barrels a anyone would stake their future on q . . day.’ four large Russian fields that have lf Saudi does not increase "He pinned his hopes for an increase been shown to be in permanent illi in production squarely on troubled decline. It was a good question, espe- supply by three million barrels Saudi Arabia. cially in light of the fact that a day by the end of the year, "Tf Saudi does not increase supply Laherrére, with his renowned calcula- A by three million barrels a day by the tions, concluded that natural gas we will face...how can I say end of the year, we will face...how can demand in Europe would grow at 6.4% this... it will be very difficult. I say this...it will be very difficult. We per year, that the global natural gas . soe: A " will have difficult times. They must cliff would hit by approximately 2030, We will have difficult times. invest.’ and that by 2050 there would be zero "But even Mr Birol admitted that reserves left. He calmly announced Saudi production was ‘about flat’. that, as far as Russian gas reserves are Three million extra barrels a day concerned, there is a 50% difference between the technical data would mean a huge 30% leap in output in just a few months. on Russian gas and what he called the "political" data. Simmons "When BBC News Online followed up by asking if this giant pointed out that North America hit its natural gas peak in 1973 increase in production was actually possible rather than simply a and is now falling off the production cliff. desire, he refused to answer. 'You are from the press? This is not Presentations exploring liquefied natural gas (LNG) imports to for you. This is not for the press. the USA concluded what FTW already knew: the cost is too expensive, the lead-time too long, and the capital investment too _ Mistakes of the Energy Industry great to make much of a difference here. In his presentation, Matthew Simmons, CEO of Simmons and Everybody, even the giant German power companies like Co. International, the world's largest investment bank, reeled off a RWE, talked about coal. Nuclear, at least for some, was also an litany of "mistakes" made by the energy industry over decades. option but there were no other viable near-term solutions He described some of these mistakes as: demand was never presented. Token representatives of hydrogen and alternative understood properly; supply was merely aspiration (not actual energies made presentations—but for those who had looked at reality); decline curves became waterfalls; we didn't have enough hard numbers, these were more show than substance. rigs (infrastructure); there was little fuel substitution; there were Lae Mistakes of the Energy Industry In his presentation, Matthew Simmons, CEO of Simmons and Co. International, the world's largest investment bank, reeled off a litany of "mistakes" made by the energy industry over decades. He described some of these mistakes as: demand was never understood properly; supply was merely aspiration (not actual reality); decline curves became waterfalls; we didn't have enough rigs (infrastructure); there was little fuel substitution; there were few technology gains. Simmons described these mistakes as cascading and compounding over time, and suggested that the underlying cause of all of them was the inherent assumption pushed by the financial markets that growth could possibly be infinite—when nothing else in the physical universe is; when no organism or species has ever avoided the cycle of growth, maturity and decline that governs the natural world. Colin Campbell, the "godfather" of the Peak Oil movement, with a bit of pique divided the conference presenters into three camps: Saudi Arabia: The Hot Topic Saudi Arabia's promise to increase production to meet US and world economic needs was the hot topic. Much discussion and hard data were devoted to the fact that Ghawar—the largest field in the world—is, along with all of Saudi Arabia's other large fields, old and tired. In recent years, both water injection and so- called "bottle-brush" drilling have been employed to maintain production, and both of these techniques tend to accelerate decline and damage the reservoirs. They are desperate measures. 12 + NEXUS In Berlin: Show versus Substance "If Saudi does not increase ; www.nexusmagazine.com AUGUST — SEPTEMBER 2004