OPEC tosses a riddle

The president of
OPEC said Sunday the oil cartel is concerned over the rising price of oil and will be looking at ways to ease prices at a September meeting.

Sheik Ahmed Fahd Al Ahmed Al Sabah, who is also Kuwait's oil minister, said in a statement that the Organization of Petroleum Exporting Countries will be exploring various options to keep crude prices at moderate levels at its Sept. 19 meeting in Vienna.

The statement, which was carried by Kuwait's state-run news agency, did not say what the options were.

...

Sheik Ahmed said oil supplies were "plentiful" and that OPEC has been producing 1.5 million barrels per day more than needed during the third quarter of 2005.

news.yahoo.com...

So they are going to work on lowering the prices. What else can you do to lower the prices?

They are already producing this much more and look at the prices.

Canada produces massive amounts of oil, it doesnt have to be shipped half way across the world and still, look at the prices.

Whats the deal? I dont even know anymore.

I saw a segment on CTV newsnet entitled "Running out of Oil". They said Saudia Arabia is running at near peak production right now.

Whats the solution?

Heres a shot I took of the T.V. Ahh sign of the times.

I wish I could find a chart that I found through the DOE (I believe it was DOE or it may have been another high ranking agency) Anyway, the chart showed all the OPEC countries, except for Iraq, how much they were pumping and how much spare capacity they had. The only country that had any spare capacity was Saudi Arabia and it was estimated at 900,000 to 1.5 Million a day. All other countries had a big fat 0.

1.5 million a day can only support, roughly, a 2 % increase in demand. SA recently publicly announced that they will not be able to keep up with demand in 15 years.

I think these select points taken from a recent BBC Hardtalk interview between DR Adnan Shihab Eldin (OPEC’s Acting Secretary General and Director of the Research Division) and Stephen Sackur would shed some light on your questions.

Reading the full text here
will be most informative.

"Dr SE- We are looking into trying to find what would be the best price or most acceptable price for everybody in the new era, so to speak."

and..

"Dr SE - Well OPEC is only one of the players. Let's remember, the prices are set in New York and London where future contracts for oil are being sold. That's what sets the price. What OPEC tries to do is influence the price into a regime that is good for everybody. Previously in 2000 - 2003 OPEC set a target 22-28 as a comfortable regime for everybody and it was successful. Everybody accepts that.

What has happened over the last two years - a number of factors have contributed to raising the price level to what we have seen right now. Even for WTI's above 50 and the OPEC basket has been hovering between 40 and 50...

SS - You lost control, basically, of the price.

Dr SE - Well, we don't control the price - let's be very frank about that.. "

and...

"SS - And my point is that you seem to have lost control of your ability to control the price.

DR SE - No. We have not, because we have done what it takes to influence the price and that is to ensure that there are enough supplies in the market that the buyers of the oil will find the oil to buy. In 2004 when demand grew by close to 3 million barrels a day OPEC pumped 3.5 million barrels extra oil and ensured that there was a surplus in the market in 2004. Now that surplus should normally have allowed prices to find a reasonable regime."

and...

"Dr SE - It appears that it has to be around 30 for the basket by just looking historically, even 2000 - 2004, it was above 30 in real terms in today's dollars. Now, the upper limit is a bit problematic because you really don't want prices to go too high to begin..

SS - (INTERUPTS)..What is too high?

Dr SE - If they start impacting global economic growth.

SS - Well, to be specific, what's too high?

Dr SE: So far we have been lucky enough that even with prices hovering around 50 in 2004 and continue to hover around 50 the global economic growth have been able to cope with minimal impact

SS: So you don't think 50 is too high?

Dr SE: Well I think that if you go above 50 significantly you will begin to see response measures that may impact the growth in the world economy."

and..

"SS: So I take it from what you're saying that ultimately you see a price that's hovering around 50-dollars a barrel?

Dr SE: Well that would probably be on the high side but I think you are close to what we think is happening right now but that's on the high side for the basket. "

and..

"Dr SE - It's hard to see how he comes to this conclusion when the fact of the matter is there has not been a shortage, neither last year, nr this year, nor in the next four or five years because even if China increases its demand for oil every year from now on at the level of six to eight hundred thousand barrels a day if you put OPEC's increase in capacity plus its spare capacity plus the growth in non- OPEC.

Even if you take the growth in non-OPEC slowing down from a million and a half in the past few years to just simply half a million you would still have enough oil in the market to meet those growing demands and to leave some should there be a sudden disruption or should there be a sudden increase in demand."

and..

"Dr SE - If you talk to the international oil companies and you ask them why have you not invested and they will refer to the lower margin meaning that the profit margin in investing in refineries as one of the factors.

The other factor they refer to is that there are so many specifications and regulations, it makes it extremely difficult to get a permit in a consuming country like Europe and the United States to build a new refinery. Even to upgrade a refinery is very difficult, you have this phenomena called the NIMBY - Not In My Back Yard type of thing.

SS- You are beginning to blame them for failing to invest in refining capacity, but many analysts would blame OPEC member states for failing to invest in increasing production to the rate that is necessary. And they make the point that OPEC members, much more than non- OPEC producers - the oil industries in those countries (your countries) are dominated by government.

They are owned by government, so it is therefore up to government to get the investment into maximising production and it's just not happening is it? "

and..

SS- (INTERUPTS) Well, you know how much oil is in the ground..

Dr SE - Yes, and we don't believe there is a problem for the next 30, 40 years. That's plenty long enough time for countries to look for alternatives.

SS- Is it really? 30 or 40 years. Think back to 1975. That's 30 years ago. We haven't shown any great ability to change the way we rely on fossil fuels in the last 30 years.

Dr SE - That's not 30 or 40 years to run out of oil. That's 30 or 40 years to look at alternatives. Oil will be with us much longer than that. Just like coal has been around for so many centuries. So oil is not expected to run out in 30 or 40 years, I'm just saying that the peak in production will not be reached in 30 or 40 years. That gives us another maybe 30 or 40 years.

Now at the end of the day we will not run out of the last barrel of oil - that will never happen - but oil will begin to make way for other more available energy sources that will be discovered and developed for the benefit of all of humanity. We encourage that. We have nothing to stand against it because it is in the interests of everybody. "

I would point everyones attention towards the highlighted area....

I will add another discussion with DR Adnan Shihab Eldin tonight ( was on BBC talking point yesterday) when i find the full text on it.

Stellar

Could only find the interview on official site so far and here is the link to it.

The themes are much the same as in the first but sometimes he is even more direct in pointing out who really is to blame for unjustifiably high oil prices.

Stellar

[edit on 10-9-2005 by StellarX]

So in a couple of years, OPEC countries won't be able to satisfy US oil needs, but Russia and Iran will have plenty of spair oil.

Suddenly, look who's becoming popular?

Looks like they found some extra oil under the old magic carpet.

OPEC wants to increase output by just under two million barrels a day because its members are not interested in record high prices that could trigger a recession, Acting General Secretary Shihab-Eldin Adnan was quoted as saying in an interview published on Saturday.
www.msnbc.msn.com...

Interesting.

If they can pull it off, then this will delay the oil crisis for a few years.
Note, 'few' being the key word in that sentance.

Originally posted by Manincloak
Interesting.

If they can pull it off, then this will delay the oil crisis for a few years.
Note, 'few' being the key word in that sentance.

As the article's above indicates it will be at least 30 or 40 years before a justifiable crisis of any type is even possible.

Stellar

Camel trader: "Oh you don't need one of them newfangled jeep thingamabobs, look at how complicated and expensive they are. I'll have plenty of camels for at least 30 or 40 years. Ride happy."

Camel buyer: "Yeah, but they're endangered, and I've heard they're sterile."

Camel trader: "Oh pshaw. I've got pleeenty of fat happy camels for you and your children, and inshallah your wonderful grandchildren."

Camel buyer: "Uh, can I check your camel paddocks myself?"

Camel trader: "Hey, how about some nice silver earrings for the wifey? Hmm? Special delivery from Morocco. Good price, just for you!"

Camel buyer: "I don't want that stuff. I wanna know if I gotta bite the bullet and get the damned jeep now before I get stuck in the desert! Well what about it?"

Camel trader: "As I told you---camels galore! Trust me! Everybody knows I'm the camel master. Care for some figs?"

Camel buyer: "Ahem, can I count the freaking camels myself?!!!"

Camel trader: "No."

Camel buyer: "Why?"

Camel trader: "That's a state secret."

Funny. I can see you would rather believe the oil companies ( Total made 1.5 million dollar profit per hour the first 6 months of this year) who we can prove had lied to us about oil availability for decades. That is your choice and if you want you may even try convince the rest of us that they have decided to stop lying suddenly and that oil really is just drying up....

Stellar

No, the point is that Saudi Aramco's reserves have never been fully audited and checked after the nationalization. When a western oil company owns oil it has to at least be somewhat truthful otherwise the investors and securities regulators will get really hard on it.

What has happened is that actually not that much new oil has been discovered, but technology has made so that you can now get 80% of the oil out of the ground as opposed to the previously assumed 20-30% as it was years ago. But you can't get over 100%.

But when it comes to most of the state-owned oil companies in OPEC, there isn't even this level of scrutiny. It is nothing but trust the 'camel trader'.

On the other hand, the OPEC countries individually and collectively have great reasons to lie and exaggerate their reserves and true state of production. This is because the OPEC oil quotas are proportional to their reserves, and wouldn't you know as soon as they adopted these rules all the OPEC countries just suddenly "found" lots and lots more oil in their country.

And the Saudi regime would lose its legitimacy and face a fundamentalist revolution if it came to light that in fact it was spending down the oil and there wouldn't be much left for future generations, and all the money went to wealthy playboys and luxury cars. Saudis use oil money to buy patronage---similar in other oil countries like Nigeria and Venezuela. Admitting that this isn't going to be continuing is bad for their political power. Who wants to ally with somebody who's gonna be poor soon?

Then there's the other point which is that if oil consuming nations really knew for sure that the oil reserves were sufficiently limited they would definitely do things to reduce their use of oil and invest in new technologies. Oil producers want this to happen as late as possible so that the price paid is as high as possible. Where will Saudi Arabia be after the oil runs out?


Commercial Oil companies sure aren't charities----but they're mother theresa compared to the state owned OPEC intruige.

No, the point is that Saudi Aramco's reserves have never been fully audited and checked after the nationalization. When a western oil company owns oil it has to at least be somewhat truthful otherwise the investors and securities regulators will get really hard on it.

Enron was not 'regulated', what? Why do you expect the stock market to shoot itself in the foot by regulating oil companies and their inventories properly thus destroying high oil prices? You do know that there is nothing illegaly about capping known oil wells simply to drive up oil prices so why trust oil companies who have made an absolute killing these last few years. If oil is so hard to get why are their profits going up so rapidly?

What has happened is that actually not that much new oil has been discovered, but technology has made so that you can now get 80% of the oil out of the ground as opposed to the previously assumed 20-30% as it was years ago. But you can't get over 100%.

That is ony way to explain why oil have not run out so far despite all oil company claims... I for one do not think it has anything to with technology but simply with the fact that there is plenty of oil. Once again their profit margins are going up so how can that indicate that oil extraction is getting harder and more expensive?

But when it comes to most of the state-owned oil companies in OPEC, there isn't even this level of scrutiny. It is nothing but trust the 'camel trader'.

It's a national security issue and we can hold them responsible the day their claims can be proven to be lies. So far we have more reason to dount known liars such as Total, Shell and Mobil.

On the other hand, the OPEC countries individually and collectively have great reasons to lie and exaggerate their reserves and true state of production. This is because the OPEC oil quotas are proportional to their reserves, and wouldn't you know as soon as they adopted these rules all the OPEC countries just suddenly "found" lots and lots more oil in their country.

They did have as much reason as anyone else to lie about their oil stocks if only to get the prices they wanted at that stage. They did not find more oil but were forced to disclose to each other enough information to sustain their production figures at the time. In my opinion they are still lying about their oil stocks but unlike you i think they have far more than they admit to. They are all saying very much the same thing and that is that oil will not run out soon. They also produce enough to satisfy all demands so there really is no reason to accuse them of price manipulation. They do not control the NYMEX or the IPE where these prices are really decided on.

And the Saudi regime would lose its legitimacy and face a fundamentalist revolution if it came to light that in fact it was spending down the oil and there wouldn't be much left for future generations, and all the money went to wealthy playboys and luxury cars. Saudis use oil money to buy patronage---similar in other oil countries like Nigeria and Venezuela. Admitting that this isn't going to be continuing is bad for their political power. Who wants to ally with somebody who's gonna be poor soon?

The money in Saudi Arabia is actually well distributed compared to many Western states ( especially the USA) and they pay off all the fundamentalist to leave them alone. They are still paying OBL for just that. Their oil however scarce will always be far cheaper to extract than anywhere else in the world. That will never change and their strategic location makes distribution far more cost effective than anywhere else.

Then there's the other point which is that if oil consuming nations really knew for sure that the oil reserves were sufficiently limited they would definitely do things to reduce their use of oil and invest in new technologies. Oil producers want this to happen as late as possible so that the price paid is as high as possible. Where will Saudi Arabia be after the oil runs out?

Look what incidents in the recent past caused oil spikes? You will notice that it has nothing to do with OPEC manipulation and has in fact everything to do with US interventions first in Afghanistan and then in Iraq. Opec always released just enough oil into the market to keep prices stable for sustained world economic growth. They can not benifit by driving prices into ranges where alternative fuel sources becomes at all viable thus the logical strategy for them would be to keep prices just right to prevent profitable alternatives. The sudden doubling of oil prices in so little time when it was so stable before can hardly be blamed on OPEC.

Commercial Oil companies sure aren't charities----but they're mother theresa compared to the state owned OPEC intruige.

Oil companies are not responsible to anyone. Heads of state can lose their heads.

Mabye you should investigate the relationship between the dollar and oil prices? Wich state in the world currently benifits most by high oil prices?

Stellar

The issue is that Saudi Arabia won't let anyone quantify their known oil reserves. That is why people are skeptical, I certainly am.

Now, if Saudi Arabia did let us check out their reserves, one of two things would happen:

- They could be telling the truth, in which case there is no issue for the moment.
- They could be lieing, in which case everyone poos their pants.

If their claims are true... what's the incentive for not allowing anyone to quantify their rerserves? None as far as I can see. Like has been said before, they can easily cap wells to make more money if they feel the need to - it's not illegal. Saudi Arabia will be rolling in it if this is the case.

If their claims are false, I don't need to outline the incentives to disallowing any quantification of their oil reserves...

Many geologists and economists think there is an issue with Saudi Oil reserves - Simmon's being one of them - there is something 'going on'...

Besides, even if they do have uber reserves, we - the world - are still consuming incredible amounts of oil that the producers can barely sustain supply for. All we need is another civil war / hurricane / generic disaster to create horrendus supply problems.

Katrina has shown how fragile out petro-economy is, irrespective of peak-oil!

www.eia.doe.gov... - this link explains the issue in numbers.

Even if the Saudi's and / or other countries do increase their supply by x million(s) of barrels a day, it just drains the reserves even more rapidly, hence when they reach the half way point and production declines - Hubbert's peak style - we're screwed.

[Edit | forgot to add some points]

[edit on 9/14/2005 by InTuneToDoom]

"Everything is okay, we have plenty of oil, trillions and trillions of barrels left, no need to worry, we even bathe in oil here! Everything is good."


I just had to post this

That is ony way to explain why oil have not run out so far despite all oil company claims... I for one do not think it has anything to with technology but simply with the fact that there is plenty of oil. Once again their profit margins are going up so how can that indicate that oil extraction is getting harder and more expensive?

The price of oil is highly leveraged to the profit margins. The price of oil is going up because demand is going up and supply isn't. Why isn't supply going up despite high prices?

Oil companies spend money in prospecting and drilling, they make money by pumping.

What's happening is that despite very high prices they aren't in fact prospecting rapidly because they don't know where to go or be sure that they could make money at it. So they sell the oil that they have already at high prices. Marginal cost of production from *existing* wells is low.

Note that reserves (as in having a well and capping it) do have to be reported.

I have a relative who is a very high executive in BP who told me (a few years ago)---that he goes to many of the industry petroleum conferences. Then, he said that nobody has been discovering much of significance they way they used to for a while now.

In reality the only oil fields of any significance which have not been highly prospected and exploited with modern technology are, guess where? Iraq.

Oil spikes in the 70's were a result of OPEC intervention due to political problems, but price quickly declined because there wasn't actually a physical shortage of oil supply, and most prominently, non-OPEC and friendly NATO countries U.K. and Norway, found and rapidly delivered oil to the market. Both their oil fields are significantly declining, and they aren't finding more, despite extensive effort with modern technology.

Oil increase now---note, a sustained increase, not a spike---is due to more demand outstripping fundamental supply. OPEC has lost control of the price because it's pumping all out.

For fifty years or so, the OPEC cartel didn't control the price of oil. The Texas Railroad Commission (www.rrc.state.tx.us...) did. For some historical quirk it's called railroad but it regulated oil. And then, were Texas oil production went, so did the world price. In March 1971 sometime, Texas oil production peaked as Hubbert said it would, and the TRC set a "100% allocation" (pump all you can) to its members. That was the day the TRC lost its major power, forever. Oil production in the continental 48 states went into terminal decline.

If the same thing is happening with OPEC, then likely the same reason is to blame: not enough oil left. Oil comes out slower the less there is of it and the longer it's been produced.

In 1971 there were still other parts outside the US which weren't yet on the declining part of the curve. I worry that now, all of the planet---except Iraq---is on the declining part of the production curve, or will be soon.

The price of oil, certainly spot price, has virtually no relation to reserves. Because oil futures are settled with physical delivery and there is a significant cost for oil storage, this price must reflect only immediate supply and demand characteristics.

Western oil companies do have to report reserves semi-honestly. When there's a scandal it is in the direction of exaggeration, not underestimation. Witness the recent debacle at Shell.
This is because CEOs etc make money from their stock options and reporting declining reserves is bad for the stock price.

OPEC? Who knows.

Originally posted by SwearBear


"Everything is okay, we have plenty of oil, trillions and trillions of barrels left, no need to worry, we even bathe in oil here! Everything is good."


I just had to post this

That gave me a good chuckle!

Some humor remains timeless, thanks for the laugh.

The issue is that Saudi Arabia won't let anyone quantify their known oil reserves. That is why people are skeptical, I certainly am.

Now, if Saudi Arabia did let us check out their reserves, one of two things would happen:

- They could be telling the truth, in which case there is no issue for the moment.
- They could be lieing, in which case everyone poos their pants.

The current high oil certainly has nothing to do with Saudi oil reserves. They have been claiming the oil reserves they have for a long time and the recent doubling in oil prices was based on everything but worries about Saudi reserves. The evidence points in the exact opposite direction when it comes to oil reserve manipulation as this prominent analyst points out.

More claims made by VERY prominent Saudi officials and Greenspan saying that "we are not running out of oil."

If their claims are true... what's the incentive for not allowing anyone to quantify their rerserves? None as far as I can see. Like has been said before, they can easily cap wells to make more money if they feel the need to - it's not illegal. Saudi Arabia will be rolling in it if this is the case.

They have nothing to gain by showing people they have say ten times as much oil as they do since the current high oil price is not based on market fundamentals. The market is reacting to nothing but fears based on possible supply interruptions and oil running out wich are fueled by constant talk of terrorism and Unilateral US actions in the world in the last few years. The Hubbert model is patently false and the original proponent never meant for it to be used as oil company spokesmen have been using it for the last few decades. It has been proven to be patently useless in projecting future oil supplies and reserves and it serves no other purpose than causing market speculation based on lies.

If their claims are false, I don't need to outline the incentives to disallowing any quantification of their oil reserves...

Many geologists and economists think there is an issue with Saudi Oil reserves - Simmon's being one of them - there is something 'going on'...

Simmon's makes many claims wich Michael Lynch proves to be based ,at best, on pure speculation. Read here for why we should not trust Simmons when he claims a reasonable price for oil is actually 180 odd USD a barrel.

Besides, even if they do have uber reserves, we - the world - are still consuming incredible amounts of oil that the producers can barely sustain supply for. All we need is another civil war / hurricane / generic disaster to create horrendus supply problems.

There simply is no evidence that the world is in fact running out of oil. There is plenty of evidence of oil price manipulation.

Katrina has shown how fragile out petro-economy is, irrespective of peak-oil!

It has shown that the US government can stage an exersize of what they might need to do in case of flooding one year before such flood happens and then still fail to stop the flooding.

www.eia.doe.gov... - this link explains the issue in numbers.

It simply shows that there is enough oil on the market on a day to day basis to supply all oil needs. Remember daily numbers is based on what countries would ideally buy and NOT what they can afford to buy at the current high prices.... Considering the high fuel prices is it not surprising that the US has managed to put 150 million barrels of oil into it's strategic reserve over the last 3 1/2 years? Some analyst suggest that this alone has raised prices at us pumps by 28 cents per gallon.

Even if the Saudi's and / or other countries do increase their supply by x million(s) of barrels a day, it just drains the reserves even more rapidly, hence when they reach the half way point and production declines - Hubbert's peak style - we're screwed.

You need to go research how reserves ( and certainly Saudi reserves) really work. According to conventional logic Saudi Arabia should have depleted many fields they have by now but most of their oil still come from the same fields it came from 30 years ago. The fields is not 'depleting' as they should it would seem and many fields all over the world does much the same.

it's No Crude Joke: This Oil Field Grows Even as It's Tapped --- Odd Reservoir Off Louisiana Prods Petroleum Experts To Seek a Deeper Meaning

Full article below.

Odd Reservoir Off Louisiana Prods
Oil Experts to Seek a Deeper Meaning

By CHRISTOPHER COOPER
Staff Reporter of THE WALL STREET JOURNAL

HOUSTON -- Something mysterious is going on at Eugene Island 330.

Production at the oil field, deep in the Gulf of Mexico off the coast of Louisiana, was supposed to have declined years ago. And for a while, it behaved like any normal field: Following its 1973 discovery, Eugene Island 330's output peaked at about 15,000 barrels a day. By 1989, production had slowed to about 4,000 barrels a day.

Then suddenly -- some say almost inexplicably -- Eugene Island's fortunes reversed. The field, operated by PennzEnergy Co., is now producing 13,000 barrels a day, and probable reserves have rocketed to more than 400 million barrels from 60 million. Stranger still, scientists studying the field say the crude coming out of the pipe is of a geological age quite different from the oil that gushed 10 years ago.

Fill 'er Up

All of which has led some scientists to a radical theory: Eugene Island is rapidly refilling itself, perhaps from some continuous source miles below the Earth's surface. That, they say, raises the tantalizing possibility that oil may not be the limited resource it is assumed to be.

"It kind of blew me away," says Jean Whelan, a geochemist and senior researcher from the Woods Hole Oceanographic Institution in Massachusetts. Connected to Woods Hole since 1973, Dr. Whelan says she considered herself a traditional thinker until she encountered the phenomenon in the Gulf of Mexico. Now, she says, "I believe there is a huge system of oil just migrating" deep underground.

Conventional wisdom says the world's supply of oil is finite, and that it was deposited in horizontal reservoirs near the surface in a process that took millions of years. Since the economies of entire countries ride on the fundamental notion that oil reserves are exhaustible, any contrary evidence "would change the way people see the game, turn the world view upside down," says Daniel Yergin, a petroleum futurist and industry consultant in Cambridge, Mass. "Oil and renewable resource are not words that often appear in the same sentence."

Mideast Mystery

Doomsayers to the contrary, the world contains far more recoverable oil than was believed even 20 years ago. Between 1976 and 1996, estimated global oil reserves grew 72%, to 1.04 trillion barrels. Much of that growth came in the past 10 years, with the introduction of computers to the oil patch, which made drilling for oil more predictable.

Still, most geologists are hard-pressed to explain why the world's greatest oil pool, the Middle East, has more than doubled its reserves in the past 20 years, despite half a century of intense exploitation and relatively few new discoveries. It would take a pretty big pile of dead dinosaurs and prehistoric plants to account for the estimated 660 billion barrels of oil in the region, notes Norman Hyne, a professor at the University of Tulsa in Oklahoma. "Off-the-wall theories often turn out to be right," he says.

Even some of the most staid U.S. oil companies find the Eugene Island discoveries intriguing. "These reservoirs are refilling with oil," acknowledges David Sibley, a Chevron Corp. geologist who has monitored the work at Eugene Island.

Mr. Sibley cautions, however, that much research remains to be done on the source of that oil. "At this point, it's not black and white. It's gray," he says.

Although the world has been drilling for oil for generations, little is known about the nature of the resource or the underground activities that led to its creation. And because even conservative estimates say known oil reserves will last 40 years or more, most big oil companies haven't concerned themselves much with hunting for deep sources like the reservoirs scientists believe may exist under Eugene Island.

Economics never hindered the theorists, however. One, Thomas Gold, a respected astronomer and professor emeritus at Cornell University in Ithaca, N.Y., has held for years that oil is actually a renewable, primordial syrup continually manufactured by the Earth under ultrahot conditions and tremendous pressures. As this substance migrates toward the surface, it is attacked by bacteria, making it appear to have an organic origin dating back to the dinosaurs, he says.

While many scientists discount Prof. Gold's theory as unproved, "it made a believer out of me," says Robert Hefner, chairman of Seven Seas Petroleum Inc., a Houston firm that specializes in ultradeep drilling and has worked with the professor on his experiments. Seven Seas continues to use "conventional" methods in seeking reserves, though the halls of the company often ring with dissent. "My boss and I yell at each other all the time about these theories," says Russ Cunningham, a geologist and exploration manager for Seven Seas who isn't sold on Prof. Gold's ideas.

Energy Vacuum

Knowing that clever theories don't fill the gas tank, Roger Anderson, an oceanographer and executive director of Columbia University's Energy Research Center in New York, proposed studying the behavior of oil in a reservoir in hopes of finding a new way to help companies vacuum up what their drilling was leaving behind.

He focused on Eugene Island, a kidney-shaped subsurface mountain that slopes steeply into the Gulf depths. About 80 miles off the Louisiana coast, the underwater landscape surrounding Eugene Island is otherworldly, cut with deep fissures and faults that spontaneously belch gas and oil. In 1985, as he stood on the deck of a shrimp boat towing an oil-sniffing contraption through the area, Dr. Anderson pondered Eugene Island's strange history. "Migrating oil and anomalous production. I sort of linked the two ideas together," he says.

Five years later, the U.S. Department of Energy ponied up $10 million to investigate the Eugene Island geologic formation, and especially the oddly behaving field at its crest. A consortium of companies leasing chunks of the formation, including such giants as Chevron, Exxon Corp. and Texaco Corp., matched the federal grant.

Time and Space

The Eugene Island researchers began their investigation about the same time that 3-D seismic technology was introduced to the oil business, allowing geologists to see promising reservoirs as a cavern in the ground rather than as a line on a piece of paper.

Taking the technology one step further, Dr. Anderson used a powerful computer to stack 3-D images of Eugene Island on top of one another. That resulted in a 4-D image, showing not only the reservoir in three spatial dimensions, but showing also the movement of its contents over time as PennzEnergy siphoned out oil.

What Dr. Anderson noticed as he played his time-lapse model was how much oil PennzEnergy had missed over the years. The remaining crude, surrounded by water and wobbling like giant globs of Jell-O in the computer model, gave PennzEnergy new targets as it reworked Eugene Island.

What captivated scientists, though, was a deep fault in the bottom corner of the computer scan that was gushing oil like a garden hose. "We could see the stream," Dr. Anderson says. "It wasn't even debated that it was happening."

Woods Hole's Dr. Whelan, invited by Dr. Anderson to join the Eugene Island investigation, postulated that superheated methane gas -- a compound that is able to absorb vast amounts of oil -- was carrying crude from a deep source below. The age of the crude pushed through the stream, and its hotter temperature helped support that theory. The scientists decided to drill into the fault.

Unlucky Strike

As prospectors, the scientists were fairly lucky. As researchers they weren't. The first well they drilled hit natural gas, a pocket so pressurized "that it scared us," Dr. Anderson says; that well is still producing. The second stab, however, collapsed the fault. "Some oil flowed. I have 15 gallons of it in my closet," Dr. Anderson says. But it wasn't successful enough to advance Dr. Whelan's theory.

A third well was drilled at a spot on an adjacent lease, where the fault disappeared from seismic view. The researchers missed the stream but hit a fair-size reservoir, one that is still producing.

It was here, in 1995, that the scientists ran out of grant money and PennzEnergy lost interest in continuing. "I'm not discounting the possibility that there is oil moving into these reservoirs," says William Van Wie, a PennzEnergy senior vice president. "I question only the rate."

Dr. Whelan hasn't lost interest, however, and is seeking to investigate further the mysterious vents and seeps. While industry geologists have generally assumed such eruptions are merely cracks in a shallow oil reservoir, they aren't sure. Noting that many of the seeps are occurring in deep water, rather than in the relative shallows of the continental shelf, Dr. Whelan wonders if they may link a deeper source.

This summer, a tiny submarine chartered by a Louisiana State University researcher will attempt to install a series of measuring devices on vents near the Eugene Island property. Dr. Whelan hopes this will give her some idea of how quickly Eugene Island is refilling. "We need to know if we're talking years or if we're talking hundreds of thousands of years," she says.

Stellar

[edit on 16-9-2005 by StellarX]

Most of questions should be covered by my last post but i will look to answer any other remaining questions tonight.

Stellar

I know the geological and physical facters governing the behaviour of oil fields, thank-you - I'm a graduate geologist. We were taught the Hubbert model at university (along with others), I've written complex simulations using the model etc... and studies seem to suggest that the model is correct and as far as I'm concerned, I'm not arguing with that until it is proved 100% incorrect -- which incidentally has not happened. Agreed, there are exceptions to the model but most oil fields follow the Hubbert model which makes intuitive sense.

There simply is no evidence that the world is in fact running out of oil. There is plenty of evidence of oil price manipulation.

I never claimed we were running out of oil, that's not the nature of Hubbert's peak which claims we have used half of the oil and besides we only run into problems when demand outstrips supply. Incidentally, Hubbert was correct regarding America's oil peak in the 70's.

I'll admit I'm not too hot on the politics and economics of the oil markets but I don't trust any economist that reckons the mysterious market forces will solve everything regardless of any physical, chamical or geological factors! It's totally absurd. They know exactly bugger-all about the geology and physics of the situation and pick and chose statistics to suit the point they wish to convey.

... oh and abiotic oil is a load of bollocks -- there is simpily no hard facts to suggest anything otherwise.

Now, my orginal query was regarding why the Saudi's do not let anyone audit their reserves. Do you have any idea why this is?

One other thing... You source all our info from news sites, do you not think for one moment that the articles could be incorrect / people could be lying? Bush, Balir and other leading politicians have lied about much worse. I don't believe in crazy conspiracy theories like many people on these forums do but I certainly don't trust any figures given out by Saudi oil officials, simply due to the fact that they won't let anyone audit their reserves. These guys can say whatever the hell they want, and I'm well aware of the political pressure on people to produce the 'correct' results.

[edit on 9/16/2005 by InTuneToDoom]