T. Boone Pickens

T. Boone Pickens on CNBC February 21st, 2008

Part I
http://www.cnbc.com/id/15840232?video=658910248

Part II
http://www.cnbc.com/id/15840232?video=658914274

Global All Liquids Production vs. Net Oil Exports

Global All Liquids Production vs. Net Oil Exports (Top 20 Producers)
Monthly Chart 2005 - 2008



These data points are 3-month moving averages. I matched the scale for the two series at 3 mbpd each.

Monthly Chart 2001 - 2008



This a longer-term view with a 10 mbpd scale for both series. Sometime in late 2006/early 2007 it appears something changed.

Mexican Production

Mexican Energy Reforms on Horizon
By Randy Woods
EnergyTribune.com
Feb. 21, 2008

Mexico’s political leadership is building on the momentum created by last year’s passage of several reforms to the state-controlled energy sector. Mexico’s congress is now considering proposals that could break the monopoly of state oil company Pemex over refining and transportation operations. Perhaps more important are proposals that would allow Pemex to partner with other companies in promising new regions, especially offshore. Pemex’s falling reserves and production, as well as its financial problems, have created a sense of urgency for reform, so some form of change is likely.

Change is needed in Mexico, where production is declining at Cantarell, its biggest oilfield. Overall reserves are dwindling away, and operational and financial problems are plaguing Pemex, which posted some $1.3 billion in losses during the third quarter of 2007. According to Pemex’s December 2007 figures, Mexico’s production declined 8.3 percent to 2.9 million barrels per day of crude in November 2007, down from 3.16 MMbbl/d in November 2006. Given Pemex’s current reserve replacement ratio of roughly 50 percent, the company has just nine years of production left. And according to an energy ministry forecast, by 2016 oil production could drop by a third if something is not done to fix the problem.

Last year’s fiscal reforms (which will reduce Pemex’s tax burden by up to $3 billion per year) were a good start. The Senate Energy Committee, led by Francisco Labastida Ochoa of the PRI, is hammering out a deal that could allow Pemex to contract out operations of its refining, transport, and distribution infrastructure. That would permit other companies to invest in Mexico’s infrastructure and let Pemex focus more on its upstream operations. Other proposed reforms include allowing Pemex to partner with other companies to jointly perform exploration and even production, enabling it to exploit its promising deepwater areas, long viewed as the answer to Cantarell’s decline. According to the ministry, deepwater production could start by 2014 at a rate of 19,000 bbl/d, increasing quickly to 174,000 bbl/d in just two years.

Pemex Says January's Daily Oil Output Little Changed
By Andres R. Martinez
Feb. 21 (Bloomberg)

Petroleos Mexicanos, the state-owned Mexican oil monopoly, said daily crude oil production in January was little changed from December. Output at its largest field, Cantarell, fell to the lowest in more than eight years.

Output rose to an average 2.957 million barrels a day from 2.954 million barrels in December[??? Jan], Mexico City-based Pemex, as the company is known, said today in an e-mailed statement. Production fell 5.9 percent from January 2007.

Crude output fell short of a company goal of 3.1 million barrels a day. Production may fall to 2.8 million barrels this year because Mexico does not have production capacity to make up for the decline at Cantarell, its largest oil field, according to Cambridge Energy Research Associates, a consulting firm.

``In the short term, there are not many alternatives,'' said Alejandra Leon, an analyst with CERA in Mexico City. ``It has been very difficult finding projects that could replace the magnitude of the fall at Cantarell.''

Crude output at Cantarell, the third-largest crude field in the world, fell 1.3 percent in January from the previous month to 1.24 million barrels daily, the lowest since December 1999. The offshore field accounted for about 42 percent of Mexico's oil output in January. The field peaked in December 2003 at 2.19 million barrels, or about two-thirds of Pemex's production that month.

President Felipe Calderon will present his plan to open the oil industry to private and foreign investment next month, said Energy Minister Georgina Kessel on Feb. 14. Mexico must begin exploring in waters deeper than 1,500 meters to help counter the decline at Cantarell and replace reserves.

Kessel set a goal of raising the rate of replacement of proven oil reserves to 100 percent by 2012. The company's reserves may run out in 9.3 years if the goal isn't met, she has said.

Crude exports fell 4.1 percent to 1.434 million barrels a day in January from December after closing export terminals multiple times because of stormy weather. Exports to the U.S. fell 1 percent to 1.146 million barrels a day. Pemex is the third-largest supplier of crude to the U.S.

Natural gas output reached a record 6.534 billion cubic feet a day last month, the company said.

Links to Mexico Charts:

October 2007

Jan 2008

Mega-Projects and Peak-Oil: A Debate

I know that once in a while I see comments about The Oil Drum website here (or maybe it's just Xeroid) and I've seen my Net Oil Export chart reposted there, so to prove that I pay attention I wanted to post a link to a debate I saw there the other day that was fantastic.

It doesn't really have much to do with Net Oil Exports, but it does have to do with the contentious issue of peak-oil which I think goes hand-in-hand with NOE.

This is where it started:
http://www.theoildrum.com/node/3623#comment-304572

But this is where it starts to get good:
http://www.theoildrum.com/node/3623#comment-304746

I highly recommend this reading, there is a lot of valuable information here presented brilliantly.

America's Energy Security a 'Mess'

Shell President: America's Energy Security a 'Mess'
by Kerry Laird
Rigzone 2/21/2008
URL: http://www.rigzone.com/news/article.asp?a_id=57175

Shell President John Hofmeister addressed U.S. policy makers on Feb. 21 to proffer suggestions for energy policy changes. Hofmeister urged policy shapers to extend the rights of U.S. companies by allowing them to drill the outer continental shelf of the U.S., which is currently illegal.

Hofmeister said that the U.S.'s energy consumption, along with outdated policy, have led to a failure in energy security.

"During the course of today, the U.S. will consume 10,000 gallons of oil a second," said Hoffmeister. "That equivalent is 21 million barrels of oil a day ... that's a swimming pool full of oil every second of every minute of every hour throughout the day.

"In addition, we will consume some 60 billion cubic feet of gas. Sixty billion cubic feet of gas, if stacked on top of each other, would be 25 roundtrips to the moon. So when you put that kind of energy consumption in perspective … when we deal with energy security in this country, that's a very big deal.

"It's the basis of our lifestyle."

Hofmeister admitted that while Shell has been one of the first big oil companies to invest in alternative energy sources, such supplies "while meaningful over the longer term … cannot displace or replace the kind of day-to-day demand for hydrocarbon energy" the U.S. has today.

"My goodness, what a mess we're in when it comes to national energy security," he concluded.

Hofmeister said that energy security should enjoy the same importance as homeland and economic security, because each contributes to the other as a part of the "foundation of America's well-being."

"With energy security, we can have the best of all worlds," he said.

The Shell president defines energy security as a "comprehensive, holistic strategy with a short-term makeup, a medium-term makeup, and a long-term makeup," which is how Shell designs its own business model.

Consequently, Hofmesiter said that this country's "short-term hurt" is that it imports more than 60% of the oil it consumes. The $2 trillion the U.S. spends on oil imports is $2 trillion that the country will never see again, he said. That money is used to develop and maintain resources for oil exporters in other parts of the world.

Last year, S&P's top-six oil companies were state-run companies, like PDVSA, Petrobras, and Rosneft. Hofmeister said the nationalism of natural resources is the "legitimate" right of sovereign nations, yet this is where American energy security fails. He said that contrary to popular belief, the energy market place is not a free market.

"When a cartel of countries can determine production limits which help to guide a price level, and when U.S. companies are prohibited by public law from developing U.S. natural resources, that represents constraint of a free market," said Hofmeister. "And so it is a myth to think that U.S. oil companies can just go and explore and produce where they choose in a free oil market."

Hofmeister pointed out that only 15% of the outer continental shelf of the U.S. is available for E&P purposes while 85% is off-limits by law.

"As long as that is the case, we are contributing to, in a sense, the lack of development of our own national natural resources," he said, "and it is necessary for us then to pull upon a pool of international natural resources, which are controlled by nationally sovereign nations."

Hofmister said that to secure the U.S.'s energy future, policies must be moved so that the country can manage its natural resources in the interest of the American people.

"Calling for a comprehensive, integrated, short-term, medium-term, long-term energy strategy would put in place for America an energy strategy that has not existed over the last 50 years," said Hofmeister. "The last time America had an energy strategy … in terms of a coherent, integrated, short-medium-long-term approach, was World War II.

"The strategy was simple: Produce all the energy the nation can produce and ration it to consumers in order to support the war effort.

"Since then, we've relied upon free markets, which have consistently lost their degrees of freedom over the last 50 years. It's time now for the nation … to approach energy security in a bipartisan nationally led model, such as we do with homeland security and economic security."

Saudi Aramco to Start Khursaniyah Output

Saudi Aramco to Start Khursaniyah Oil Output by April
By Nidaa Bakhsh and Grant Smith
Feb. 18 (Bloomberg)

Saudi Aramco, the world's largest state-owned oil company, will start production from its Khursaniyah oil-field project by April.

``Khursaniyah will make available 500,000 barrels a day within two months,'' Senior Vice President Khalid Buainain said today at a conference in London.

The start of output was delayed from December to allow ``commissioning activities'' to be completed. Saudi Arabia, like other Persian Gulf oil producers, is implementing large-scale energy projects to boost crude oil and refining capacity to meet rising demand.

Saudi Aramco plans to produce 12 million barrels a day by 2009 from all its fields, Buainain said. An additional 250,000 barrels a day this year from the Shaybah field, in the southeast desert known as the Empty Quarter, will bring total output to 750,000 barrels a day. It's also planning to pump 1.2 million barrels a day from the Khurais field by mid-2009, and expects production from the Manifa field will reach 900,000 barrels a day from 2011.

The company expects to see no drop in demand from the U.S. for crude oil even as economic growth slows, Buainain said. The Organization of Petroleum Exporting Countries, whose members produce more than 40 percent of the world's oil, and the Paris- based International Energy Agency, cut their estimates for oil demand because of the threat of a U.S.-led global recession. OPEC maintained its output quota at a meeting on Feb. 1.

EIA Revisions

For this first chart, I used about 12 data sets I had saved from the EIA. The first one was from November 2005. Since it does not use moving averages, I have included 2004 data here.




In this second chart the numbers are 3-month averages. I used this approach to eliminate some of the noise. I was pleased with the result. Anyone see any patterns?




This third chart shows how over time(about two years) the final revisions tend to settle on the higher level.



And of course, the one that includes price. I threw in some extra verticle lines around where I thought the downward trends in price are. I'm not seeing much of any correlation with short-term increased production levels.




Over this period the highest value for the difference between the high and low revisions was about 400,000 bpd, with an average of about 250,000 bpd (or 0.33%).

A Random Essay About Oil

Oil Hydra
Is there an easy way out of the mess we've gotten ourselves into?
By Victor Davis Hanson
NationalReview.com

November 08, 2007

Oil is nearly $100 a barrel. Gas may soon reach $4 a gallon. And Americans are being bitten in almost every way imaginable by this insidious oil hydra.

Two billion people in China and India are now eager consumers. They want the cars, gadgets, and lifestyle that Westerners have claimed as a birthright for a half-century. Their growing energy appetites mean that the international petroleum market may remain tight, even if Americans — who use almost twice as much oil per day as China and India put together — cut back on imported energy.

The Middle East is raking in billions each week. At best, our so-called friends in cash-laden Saudi Arabia subsidize fundamentalist mosques and hate-filled madrassas worldwide. At worst, our enemies in petrol-rich Iran are after the bomb, send weapons into Iraq to kill Americans and fund Hezbollah jihadists.

War in Iraq, rumors of fighting in the near-future in Iran and tension on the West Bank only panic markets, raise oil prices and further enrich our grinning enemies.

The nearly half-trillion dollars we will soon pay for imported oil does a lot more than prop up Russia's Vladimir Putin, Venezuela's Hugo Chavez and Iran's Mahmoud Ahmadinejad. The petrodollar drain also contributes to our trade deficits, falling dollar and a general demoralization of the American people.

Our oil habit not only makes us dependent on some creepy suppliers, but we look like fools as we work nonstop to hand over our earnings to those who are rich by an accident of sitting atop oil someone else found and developed.

There is talk in this country of a gradual transition to alternative fuels, solar power, wind machines, plug-in electric cars, and nuclear power. Supposedly Americans will soon be less dependent on imported oil — while helping to slow global warming — as we are weaned off our fossil-fuel addiction.

But let's talk about the present: If oil continues to climb, ultimately, it will change our very way of life. Hard-pressed families will shell out thousands more a year in direct transportation and heating and cooling costs, and more still as consumer prices inflate.

It may have always been unwise for commuters to buy large SUVs and V8 supercab trucks. Now, though, we may reach the point where these pricey huge vehicles will sputter to a halt. Indebted Americans will still shell out monthly payments to pay off their parked dinosaurs, only to drive them for emergency or ceremonial occasions.

Also expect rising popular anger at an asleep-at-the-wheel government that for the last 20 years should have been doing a lot more to mandate conservation, subsidize alternate fuels, encourage nuclear power and open up oil fields offshore and in Alaska.

Instead, doctrinaire free-market purists and radical environmentalists, hand in glove, for years have thwarted both conservation and exploration.

True, in a perfect world, the market would teach Detroit not to build gas-hungry big cars. Yet in the here and now, we are needlessly burning scarce fuel as too many 7,000-pound mammoths deliver single 180-pound drivers to work — while the auto industry continues on its path to irrelevance.

Meanwhile, green politicians may not want messy oilrigs off their coasts, or tankers up north among the ice and polar bears. But so far very few of them have sworn off jet travel, nice cars or ample homes.

Oil companies claim that they are only passing along escalating costs from overseas suppliers over which they have no control. But around a third of our oil is pumped here at home.

Think about it: The cost to extract oil from existing older wells is relatively fixed. For much of the 1990s and early 2000s, oil prices had been steady at between $20 and $30 a barrel (when adjusted for inflation) — and domestic oil companies did quite well. So now at near $100 a barrel, these corporations are raking additional profits of over $60 a barrel — potentially a domestic windfall of hundreds of billions of dollars each year.

Is there an easy way out of the mess we've gotten ourselves into?

Maybe a Silicon Valley genius inventor or entrepreneur will step forward with a breakthrough new energy source.

Maybe our government will start a crash project on the scale of the Manhattan Project to conserve and produce more fuels.

Maybe China and India will consider radical conservation measures.

Maybe countries like Iraq, Libya, and Russia will start reinvesting in their oil infrastructures and double production.

Maybe the Middle East will finally settle down and soothe jittery oil speculators.

Those are too many maybes to wait for while our way of life hangs in the balance. It is past time to demand from our presidential candidates, as well as the current government, exactly when and how they plan to slay this many-headed oil monster.