Obviously with oil resources becoming geologically more difficult and financially more costly to extract the level of exploration and production has a significant impact on future oil supplies. With major oil companies decreasing their capital expenditure budgets (and the little guys having trouble even getting credit so that they can drill) the future of oil supplies does not look good – especially if there is a rebound in global economies.
The excerpt below is from ASPO-USA‘s year end “best of” article series, and well articulates this issue. If you want to read more about oil supplies with those who are hard-core into it (no recommendation from ELA staff here – just another data source) try visiting the Oil Drum.
As the International Energy Agency has been warning for years, a slump in upstream oil investment now means an oil supply squeeze later; the only question is when and how bad it will be. IEA Director Nobuo Tanaka warned in November that “Sustained investment is needed mainly to combat the decline in output at existing fields, which will drop by almost 2/3 by 2030.” Tanaka added that global upstream spending was budgeted to drop $90 billion, or 19%, during 2009 vs. 2008—the first decline in a decade. While some of those declines are offset by lower costs for exploration and production work, the remaining deferred investment means less oil five to ten years out.
The super-major investor-owned oil companies report that they will maintain the bulk of their planned capital expenditures going forward. Total SA plans to keeps its capital investment budget at $18 billion, Chevron will trim theirs 5% from 2009 to $21.6 billion in 2010, while ConocoPhillips will cut their capital budget by 10% to $11.2 billion. It is the smaller companies, those that are more reliant on credit to finance drilling and other field operations that are already in more of a bind. Additionally, a large number of OPEC projects have been delayed.
The investment slowdown has already impacted Canada. During 2009, the nation’s production declined slightly for a second year in a row, despite their enormous tar sands resource. But building tar sands facilities costs more than any other commercial liquid fuel operation, so those investments were the first to be delayed and cancelled. In fact, when oil dropped below $40 a barrel, some tar sands operators shut down their operations, since at that price their costs exceeded revenues.
What few analysts mention is that the impacts of this “above ground” investment slowdown will combine with the geologic limits that are impacting an increasing number of countries worldwide.
