Get Ready for Another Oil Shock!

By Ivanhoe, L. F. | The Futurist, January-February 1997 | Go to article overview
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Get Ready for Another Oil Shock!


Ivanhoe, L. F., The Futurist


A petroleum consultant warns that we've already found almost all the oil there is, and we're using it up fast. We must therefore anticipate that there will be less petroleum entering world markets within the foreseeable future.

After the oil crises of the 1970s, petroleum shortages disappeared and prices stabilized. The world stopped worrying about oil, but the grim fact remains that the world's petroleum reserves are limited, and they are rapidly being used up.

What happened in the 1970s was simply that prices rose suddenly, so the search for additional petroleum supplies became compelling and the incentives to conserve oil increased sharply. Shifts in supply and demand of all fuels solved the global petroleum problem.

But a much more serious problem looms in the future. Most of the world's large, economically viable oil fields have already been found, so a permanent oil shock is inevitable early in the next century. More Europeans than Americans are aware of this.

The question is not whether, but when, world crude oil productivity will start to decline, ushering in the permanent oil shock era. Some believe we have enough to last another 50 years at present rates. I disagree: Most of the large exploration targets for oil supply have been found, at the same time that the world's population (and, along with it, demand for energy) is exploding.

Modern Petroleum Technology

Petroleum exploration is an efficient technical procedure. Shooting a modern seismic net of lines across any geologic/sedimentary basin will reveal virtually all significant prospects, thus showing oil companies where to lease for further test drilling. However, it is a fact that the largest oil and gas fields in any sedimentary basin or oil province are also the biggest targets and the easiest to find with any given technology; thus, they are normally found early in any exploration phase.

Today, there are virtually no areas where petroleum exploration cannot be successfully carried out if regional geological studies indicate a good chance of finding major petroleum fields (i.e., those with an ultimate recovery of more than 100 million barrels of oil).

The latest phase of petroleum exploration began with the introduction of 3-D digital seismic methods in the late 1970s. This technical refinement coincided with the Iran-Iraq War and the accompanying 1980 oil price surge to $40/barrel, which produced a global public energy panic. A worldwide exploration boom followed immediately to find oil anywhere outside the Persian Gulf.

Unfortunately, despite intense efforts by all of the world's oil companies, only a few of the new major fields promised by their geologists were actually found. The world's accessible oil provinces had all been previously recognized and most of their major fields found earlier. Numerous major finds had been made in the late 1960s, which brought on production offshore by new marine technologies during the mid-1970s in time to bring the OPEC producers to heel. No new major oil provinces (those producing 7 to 25 billion barrels) have been found since 1980.

The world is finite. The 1,311 known major and giant oil fields contain 94% of the world's known oil and are accordingly the most critical for future global oil supplies. Figure A summarizes when and where the known global fields were discovered. The peak global oil finding year was 1962. Since then, the global discovery rate has dropped sharply in all regions.

Modern three-dimensional seismic and horizontal-drilling techniques improved current oil recovery in known fields, but made no substantial change in global reserves or discoveries of major fields. When the world oil price collapsed in 1986, exploration funds and efforts were cut back drastically everywhere; and by 1989, all major companies were downsizing and eliminating most of their geological and geophysical staffs. The minimum six-year period needed to discover the five largest fields in any basin had passed with-out making enough discoveries to whet top management's enthusiasm, so the money dried up for all but prime prospects.

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Get Ready for Another Oil Shock!
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