The oil business doesn’t know whether it believes in peak oil or not. Total’s CEO, Christophe de Margerie, says it will be difficult to reach 100 MMb/d of worldwide output. Jeroen van der Veer, CEO of Shell, believes that after 2015, supplies of “easy” oil and gas will no longer meet demand. On the other hand, ExxonMobil argues that a “peak in petroleum liquids production…is unlikely in the next 25 years,” and the consultancy CERA states “Peak Oil theory is garbage.”

Most industry figures say there is no shortage of resources. They point instead to geopolitical issues and increasing technical challenges. But such subtleties
are easily lost when these remarks are reported to the general public. As a result, advocates of peak oil create the impression that even the mainstream oil business is swinging around to their point of view.

This uncertainty is dangerous. Of course, it is for each individual company and country to make up its mind on the balance of supply and demand and to plan its investments accordingly. But the idea of an imminent peak is very harmful to the oil business in several ways.

Perception is reality

Oil-rich nations, foreseeing a continuation of high oil prices and a lack of competitors for their output, become more hostile to foreign investment.

Arguments for allowing drilling in new areas, notably the offshore US and Alaska, are met with the reply that this is pointless since oil is running out anyway.

There is added motivation to subsidize and otherwise encourage alternative energy sources (renewables and perhaps nuclear), which are already favored for environmental reasons.

And at a time when recruiting new employees is vital with the “Great Crew Change” imminent, graduates are deterred by the idea of entering a sunset industry.

Stating a case

The oil business has strong arguments against peak oil. Major OPEC nations retain enormous underdeveloped reserves. Although most are likely to make only cautious, steady increases in production, they are not about to plunge into decline, as peak-oilers suppose. On the non-OPEC side, recent massive discoveries in deepwater Brazil and to a lesser extent in places such as Ghana and Uganda show that new frontiers still offer positive surprises.

With at least 300 Bbbl of oil in place currently unrecoverable in the US alone, there is enormous scope for enhanced oil recovery (EOR) techniques. One of these, carbon dioxide (CO2) injection, offers the oil industry a golden opportunity to make a positive contribution to tackling climate change.

Unconventional oil

Most importantly, unconventional oil provides an almost limitless backstop to conventional supplies. The Canadian oil sands are probably the most high-profile example. New approaches there, such as Nexen Inc.’s gasification of the heavy ends of crude to generate steam, and Devon Energy’s use of saline aquifers rather than freshwater, offer some solutions to environmental limitations.

Recent announcements by Total in Madagascar, Shell in Russia, and ENI in Congo suggest that the oil sands boom is spreading beyond Alberta.

Though biofuels have initially run into problems of environmental damage and competition with food, second-generation techniques and new crops such as jatropha and perhaps algae offer a larger and less problematic contribution. And with the largest potential volumetric contribution, a number of promising approaches to oil shales suggest that this vast resource might be on the verge of commerciality.

Unconventional oil plays a crucial role in the future supply picture. Its enormous volumes guarantee that the world will always have an alternative to the major reserve holders of OPEC and Russia.

And the success of North American shale gas plays demonstrate how what was impossible one year can be routine the next.

This growing role for unconventional hydrocarbons might seem to support the idea of an end to easy oil, but in fact there has never been an age of easy oil. Technology has advanced in step with the demands made on it. High-sulfur Ohio crude was unconventional in the 1880s. North Sea oil was a huge challenge in the 1970s. And deepwater was the difficult oil of the 1990s.

The real message

For these reasons, we are not about to reach peak oil — not on the supply side, at least. But alternative energy sources and new end-user technologies threaten hydrocarbons’ long-term dominance.

The industry must get the message across clearly that there is no shortage of resources in the ground. It needs to advertise better its great advances in producing unconventional oil and gas. Finally, it needs to show a skeptical public that this can be done in an environmentally acceptable way.

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