Articles

Peak oil and the seismic silver lining
Posted on Saturday, February 9th, 2008

First published in International Hydrographic & Seismic Search Magazine, February 2008

The launch of International Hydrographic & Seismic Search Magazine raises an interesting question: have the publishers taken leave of their senses? True, the coffers of their target audience have been swollen by the near-$100 barrel, but the outlook for the global oil industry and economy is darkening by the week. The fate of the oil service sector is ultimately tied to that of the producers, and both IOCs and NOCs are clearly in trouble. In the circumstances, it is reasonable to ask whether hydrographic and seismic contractors’ fortunes are about to nosedive, and whether the first edition of this magazine might also be its last.

All the evidence now suggests the world is rapidly approaching “peak oil”, the point when global oil production goes into terminal decline for fundamental geological reasons. Output is already shrinking in 60 of the world’s 98 oil producing countries, and fourteen more are predicted to peak in the next decade. The industry consensus is that aggregate output for the whole world except OPEC will peak in about 2010. It is also widely agreed that the cartel’s members have grossly exaggerated the size of their reserves, meaning that by any reasonable assessment global output must also peak soon. It may already have done so: total liquids production is lower today than in July 2006. Meanwhile the oil price sends a message that can only be described as skywriting.

Senior oil executives have traditionally avoided any talk of geological constraints, but now even they admit the industry is in fundamental difficulty. A growing number believe output will never exceed 100 million barrels per day, including Christophe de Margerie, chief executive of Total, Shokri Ghanem, head of Libya’s National Oil Company, and James Mulva, boss of ConocoPhillips. Sadad al-Huseini, who until 2004 ran exploration and production for Saudi Aramco, recently claimed global oil production has already reached its ultimate plateau and that output will start to fall within 15 years.

This new openness only reflects the obvious reality; for all their power and profits, the world’s biggest oil companies are in trouble. For many, production is already falling. And most are struggling to replace the oil they do produce with fresh discoveries – although not for lack of trying. A recent study by analysts John S Herold showed that the world’s 230 biggest oil companies raised their upstream spending by 45% to over $400 billion in 2006, but that oil and gas reserves inched up by just 2%. The report concluded that peak oil would force oil companies to choose from four options: “try to become a dominant participant, find a niche operational talent, harvest assets, or liquidate quickly.”

All of which is exactly what you would expect: the world is well-explored for oil and new prospects are in short supply. A private conference of technical experts held by the AAPG in Colorado Springs in 2006 concluded that around 250 billion barrels remains to be found globally, according to one executive who attended. The Arctic may be the last major frontier, but a study from Wood Mackenzie and Fugro Robertson found that it contains ‘significantly less’ hydrocarbon resources than widely believed, and half of that was uneconomic. The United States Geological Survey has just slashed its estimate of the potential of East Greenland from 47bn barrels to just 9bn. No wonder the majors give more money to shareholders than they spend on exploration.

But if all that sounds unremittingly bleak, ironically depletion could be good for hydrographic and seismic business. Oil companies may soon start to abandon exploration altogether, but as the supply situation worsens, there will be an even greater emphasis on reserves growth. Squeezing the maximum from known reservoirs will require all the industry’s technical nous, including more use of sophisticated techniques such as 4D seismic. And as the industry is forced to exploit ever smaller – though more numerous – fields, it may mean more hydrographic and seismic work not less.

Another apparent threat to the oil industry could prove even better news for the sector: climate change. According to a recent paper by climate scientist Jim Hansen of NASA, to have any chance of keeping atmospheric carbon dioxide below 450ppm – the assumed threshold for ‘dangerous’ global warming – all coal fired power stations will soon have to be fitted with carbon capture and sequestration (CCS). If this happens, the natural place to store the CO2 is depleted oil and gas fields, but since we cannot be certain it will stay down there, long term monitoring will be essential. Again, more business for companies that provide reservoir measurement and modeling services.

But if the world keeps burning coal, and if CCS is to play a significant part in fighting climate change, the world’s depleted oil and gas reservoirs just aren’t big enough to house all the emissions (see graph). Finding extra capacity would mean exploring the world’s saline aquifers, providing yet another massive opportunity for hydrographic and seismic operators. So it looks as if this magazine does have a future after all.

hansen-emissions-by-source-400.jpg
The carbon contained in the world’s coal would not fit into the world’s depleted oil and gas reservoirs. If we are to keep burning coal, and CCS is to play a major part in combating climate change, saline aquifers must also be explored. Source: Implications of “peak oil” for atmospheric CO2 and climate, Kharecha, P.A., and J.E. Hansen, 2007. Global Biogeochem. Cycles, submitted. http://arxiv.org/abs/0704.2782 [physics.ao-ph]



2 Comments on “Peak oil and the seismic silver lining”

John Theodorou Says:
February 12th, 2008 at 2:03 am

CCS is in disarray with the apparent canning of the flagship FutureGen project which was meant to showcase this technology. As energy expert Vaclav Smil comments on the whole CCS hypothesis;

“…capturing and burying just 10 percent of the carbon dioxide emitted over a year from coal-fired plants at current rates would require moving volumes of compressed carbon dioxide greater than the total annual flow of oil worldwide, a massive undertaking requiring decades and trillions of dollars.”

http://www.nytimes.com/2008/02/03/weekinreview/03revk.html



Steve Wilson Says:
February 12th, 2008 at 3:05 am

You did not mention oil offshore West Africa. Significant finds are being made in the transform margin geology offshore all of West Africa. Hyperdynamics Corp reports they have found over 25 drillable prospects offshore The Republic of Guinea and they have just begun their development and interpretation of seismic data. So,while “Peak Oil” supply demand /problem is not solved there is more work to do to get oil flowing as supply continues to decrease worldwide.





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