When an oil deposit of just a billion barrels becomes headline news, you know there’s trouble ahead. Why? Because it tells you that all of the large reserves have gone. We are now drilling into the small, hard to recover deposits that require a large investment for very little return. Indeed, we have now reached the stage where oil finds of just a few million barrels are considered headline news:
“Norway’s Statoil says it has made an oil discovery in the outer Moray Firth containing up to 130m barrels – a find that could help to pull the region’s oil and gas producers further out of a slowdown.”
To put that find into context, that is 28 hours’ worth of global oil consumption. On a more local scale, it is a little over two years’ worth of UK consumption. Not to be sniffed at, of course. But then 130 million barrels is the resource (the amount in the ground) rather than the recoverable reserve. Far from adding vigour to the oil industry, it is a measure of just how desperate things have become.
This is not, however, the tale that mass media wish to tell. For example, just two years ago, Andrew Critchlow writing in the Telegraph proclaimed that:
“North Sea oil turned 40 years old this year, outlasting the predictions of doomsayers who claimed that the wells would have run dry years ago.”
Since 1975, a total of 43bn barrels of crude oil had been extracted with perhaps half as much again is still beneath the sea bed. But behind Critchlow’s calls to keep the party going at all costs are some sobering statistics:
First is the dip in production between 1988 and 1994. This is the main reason why Critchlow was able to pour scorn on the “doomsayers.” The production dip has a single cause – the Piper Alpha disaster. By taking a large part of North Sea oil capacity offline, the disaster forced the UK to become a net importer of oil. More importantly, it pushed the date of peak North Sea oil production back from 1995 to 1999. That is, it delayed the doomsayers’ predictions by five years.
This is the second key point – oil is a finite resource. Just because Critchlow, the City of London banks and the UK government want to keep the North Sea oil party going is neither here nor there. The fact is that it takes millions of years under precise climatic and geological conditions for oil to be created. The only argument for humans to have is about how quickly (if at all) we are going to extract and burn it.
Since 1999, UK North Sea oil and gas production has fallen more than 60 percent. Moreover, as with every other oil deposit on the planet, we have recovered the low-hanging fruit first. All of the big fields in the North Sea have been drilled. What remains are relatively tiny deposits in less accessible areas that often require more expensive recovery processes. Much of what remains in the ground is going to stay in the ground because it is too expensive to extract.
This, perhaps, is why a serious financial newspaper like the Financial Times has stooped to reporting two years’ worth of oil (of which as little as 25 million barrels may be recoverable) as if it is Britain’s salvation. The alternative is to admit the hard reality that:
“The North Sea is a mature oil and gas province. Output from the two main producers – Norway and the United Kingdom – has peaked and the remaining reserves to be exploited are smaller and/or more technically challenging than those developed in the past, thereby shrinking potential returns. As several fields approach the end of their commercial lives, the decommissioning of offshore platforms and the accompanying bills are looming on a scale not seen before anywhere in the world.”
Indeed, there is probably not even enough recoverable oil left in the UK sections of the North Sea to cover the cost of decommissioning. Little wonder the UK media keeps cheer-leading ever smaller oil discoveries. It surely cannot be too long before the discovery of a few 50 gallon drums of old engine oil will be treated as a major find.