The E&P head honcho at France's Total has a practical take on an important issue of the global oil economy: productive capacity.
The world lacks the means to produce enough oil to meet rising projections of demand for fuel over the next decade, according to Christophe de Margerie, head of exploration for Total and heir presumptive to the leadership of the French energy multinational.The world is mistakenly focusing on oil reserves when the problem is capacity to produce oil, M de Margerie said... Forecasters, such as the International Energy Agency (IEA), have failed to consider the speed at which new resources can be brought into production, he believes.
The IEA predicted in its World Energy Outlook that global demand for crude oil would reach 121 million barrels per day by 2030, of which more than half would be supplied by Opec. The agency predicted that more than $3 trillion (£1.72 trillion) of investment in wells, pipelines and refineries would be needed to raise output to such levels.
However, Total’s exploration chief reckons the output rise is impossible, given available resources and geopolitical constraints on gaining access to reserves in Opec countries.
The IEA was mistaken in using recovery factors that failed to consider the timing of new resources coming on stream. M De Margerie said. The world was confusing the issue of reserves with the scale of the problem in producing those reserves. He said: “The oil reserves are there, that is the good news, but what we can bring on today to meet demand is limited by factors other than what scientists see in a lab or think-tanks.”
Given the fact that an increasing percentage of world oil reserves are controlled by governments that are, at best, not fully open to the western E&P industry's vast technical capabilities, this production capacity gap is yet another structural factor leading to permanently higher prices for oil, gas, and refined products.
Posted by Alan at April 8, 2006 09:24 AM