[CAMWEST-discuss] Total, Shell Chief Executives Say `Easy Oil' Is Gone (Update1)

Danny Hannan danny_hannan at yahoo.com
Fri Apr 6 00:08:19 UTC 2007


Thought you people would like some more doom and gloom, it's a while since I sent some.  This is straight from the horses mouth so to speak.

By Stephen Voss and Tara Patel
April 5 (Bloomberg) -- The days of so-called ``easy oil'' are over, making it harder to meet demand without complicated and expensive projects, the heads of two of Europe's largest oil companies said today. 
The International Energy Agency, an adviser to energy importing nations, estimates oil supply will have to rise 39 percent to 116 million barrels of oil a day by 2030 from about 86 million barrels a day now to meet world demand. 
Meeting such targets with conventional oil sources will be ``extremely difficult,'' Christophe de Margerie, the chief executive officer of Total SA, Europe's third-largest oil company and its largest refiner, said at a conference in Paris today. New supply will be based on ``huge high-tech'' projects. 
Jeroen van der Veer, the chief executive officer of Royal Dutch Shell Plc, Europe's largest oil company, said countries no longer seek Shell's help with conventional reserves, such as onshore oil or gas that's cheaper to develop than offshore fields. 
``We can't expect profits in easy oil,'' Van der Veer said at the same conference. ``If there is easy onshore oil, people don't need Shell.'' He said there are enough opportunities for international oil companies to invest in complex, large oil and gas projects using new technology. 
Costs Rising 
Explorers are pushing further offshore as technology improves and fields onshore and in shallow water run dry. Oil companies are expected to increase exploration spending by 9 percent worldwide this year, according to Lehman Brothers Holdings Inc. Spending on exploration in deep water will rise 44 percent to $18 billion by 2011 from $12 billion this year, a report by consultants Douglas- Westwood Ltd. said yesterday. 
Paris-based Total said today it would be pumping 240,000 barrels a day by mid-April from a new field in Angola called Dalia, about 135 kilometers (83 miles) offshore in waters as deep as 1,500 meters, or nearly a mile down. 
Developing that field cost $4.6 billion, an increase of 53 percent from the $3 billion spent to develop another offshore Angolan field called Girassol, de Margerie said today. By comparison, costs for Usan, a 160,000-barrel-a-day project off Nigeria, will cost $7 billion, he said. 
South Africa's Sasol Ltd. is due to ship its first cargo of synthetic diesel made from Qatari natural gas this month. Shell began a larger gas-to-liquids project in February called Pearl, which aims to produce 140,000 barrels a day. Price escalation may push the final cost for Pearl to as much as $18 billion. 
Capital Spending 
Shell's capital spending will reach as much as $23 billion, about 10 percent more than last year, the company said in February. Total expects to spend $16 billion this year, 75 percent of that on exploration and production, up from $15 billion in 2006. 
Shell booked drilling rigs last year at 30 percent below market rates, saving $300 million on rig hires, Van der Veer said today. 
Total, which has had fields seized in Venezuela and is considering an Iranian gas project as that nation faces sanctions for its nuclear program, said reduced access to fields hurts. 
``Governments need to take their share of the responsibility'' de Margerie. ``Don't come crying when we are facing a shortage. We're going to face huge challenges to bring additional capacity on stream.'' 
International oil companies like Shell, Total and Exxon Mobil Corp. are facing stiffer competition from various state-run oil companies, including those of China and India, when bidding for exploration rights in producing nations such as Nigeria. 
``The world has changed'' in terms of competition ``between international oil companies and national oil companies,'' said Mohamed Meziane, the chief executive and president of Algerian state-run oil company Sonatrach. 
International oil companies are focusing on areas where their technology give them advantages over cash-rich state companies. 
The Shell and Total executives said their companies were both investing in techniques to capture and store carbon dioxide emissions, which would make coal projects more environmentally acceptable, particularly in China.
 
This quote from a Lehman Brothers report tells the rest of the story:  “Beyond 2007, the supply/demand balance (for oil) looks increasingly tight and we conclude that there is more risk of a supply shortfall than a surplus toward 2010.”  (Lehman Brothers 2006)

While it's a big hit in the pocket for every one as all costs will rise including interest rates, it will be a boon to cycling and other human powered transport.

Dan

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