There's no argument that will bring ‘em out of the trees faster than anyone suggesting that the peak oil contention is bunk or at least no longer valid.
Alan Kohler would know this and have not been surprised that his commentary about the transformation of global energy markets as a result of shale oil and gas has drawn a mass breakout of postings, mostly of the 'you must be mad' line of approach (The death of peak oil, February 29).
The commentary drew 168 responses on The Drum in addition to those in response to its first appearance in Business Spectator. To which you can add 87 responses to a critical piece in Crikey and a shoulder charge from a contributor to Climate Spectator, who told him that "none of your statements can be supported by statistical evidence.”
Kohler may care to potter over to Adelaide in the second week of May to the 2012 conference of the Australian Petroleum Production and Exploration Association – of which I was once, a long time ago, executive director for 11 years – and listen to one of its star plenary speakers, Christophe de Margerie, head of French oil and gas giant Total.
Allegedly known to his workers as 'Big Moustache', de Margerie, grandson of the founder of Tattinger Group (as in champagne), stands out among the executives of the petroleum majors as still publicly stating that a peak is close in global oil production – with supply stalling at 95 million barrels a day (not that far up from today’s 91 million barrels).
He argues for the exploitation of every energy source available, including coal, nuclear and solar power, and is heavily engaged in pursuing oil in American shale deposits.
Kohler, in his article drawing fire from the doom-and-gloomsters, argues that the US alone has an estimated two trillion barrels of shale oil reserves (eight times what Saudi Arabia claims) and points to large prospects in Australia and elsewhere.
His critics say he is confusing reserves and resources, the former being the highly desirable 3P target for explorers (proven, possible and probable), and that in any case the big problem is that accessing shale oil will create a whole new threat to life on the planet as we know it, by adding to global carbon dioxide emissions.
Like the climate change debate itself, the peak oil argument can never be resolved between believers and non-believers. As the multitude of responses to Kohler’s commentary demonstrate, everyone has a statistic to throw on the pyre.
I am inclined to agree with those who argue that part of the reason upstream petroleum leaders, other than de Margerie and his Total team, don’t want to acknowledge even the prospect of peak oil is tactical – countries like Russia, Iran and Venezuela, with large still untapped reserves, will rush to demand higher returns from them.
But it is not possible to realistically assert that the perspectives of 2010, when the peak oil noise was last at its peak (sorry), are equally valid in 2012.
Standing back, one can see American production slowly rising again as a result of the shale revolution, as conventional resources such as those in Alaska begin their decline and the Gulf of Mexico looks like finally making a comeback from the Macondo disaster.
Meanwhile about half a million barrels of production a day has been yanked out of the market because of big-time hassles in South Sudan, Yemen and Syria.
On the other hand, additions to supply could soon be reaching the market from Iraq, Angola, Libya and Colombia.
Kohler doesn’t say so in his commentary but I wonder if he has been reading the new analysis from banking giant Citi.
Heavily paraphrased, Citi’s riposte to 'peak oilers' and their less bold cousins, 'plateau oilers', is that the International Energy Agency has misread the tea leaves, strongly influenced by the tendency in the past decade for major projects to come on line much later than expected, at higher costs than budgeted and with much less oil.
Citi, in my interpretation, asserts that the IEA has committed the classic error of using yesterday’s information to forecast tomorrow’s outcomes and the bank predicts that a surge in discoveries and their conversion in to production should see a marked improvement in the oil supply outlook.
Apart from the US, Citi points to significant shale oil prospects in Argentina and France’s Paris basin.
Australia comes in for a special mention: "Australia’s shale may also hold promise and drilling could be in for a breakout later this year and early next year, with oil field services companies positioning themselves for a ramp-up of activities.”
You would have to go back to the 1960s and 1970s, when Esso Australia and BHP (as they then were) made major discoveries in Bass Strait, to find this country getting a mention in the same breath in commentaries on global oil prospects.
Citi sums up the outlook like this: "The shale oil revolution is in full swing in North America. It is unlikely to stop there and eventually its impact will be felt globally. For now, the immediate, tangible market impact will be to drive down oil prices in the US versus the rest of the world. The US, after many weak starts, appears to be on course to achieve energy independence this decade.”
All this, of course, is terrific grist to the mill of APPEA for its 52nd annual conference in Adelaide, because the association has lined up, in addition to de Margerie, the Saudi Arabian Minister of Petroleum and Mineral Resources, Ali bin Ibrahim al-Naim, the new executive director of the IEA, Maria van der Hoeven, and ExxonMobil’s Emma Cochrane, one of the executives of its Asia Pacific and Africa gas marketing activities, plus the chief executive of BHP Billiton Petroleum, Michael Yeager, and a bus load of local senior petroleum types led by its current chairman, David Knox of Santos, to talk to the theme of 'The Energy Revolution'.
As Kohler (more or less) says in his much maligned commentary, if the US could become self-sufficient in energy, the tectonic plates of global supply shift again, the international economic picture changes and the world’s governments, debating carbon abatement, have to think things through anew because the emissions picture in 2030 will be altered.
Meanwhile at CERAWeek in Houston – wonderfully described in The Wall Street Journal as the global energy elite’s own version of Davos, sans the skiing – top speakers have been arguing this past week that the shale revolution is "changing the political dialogue on energy.”
I think that’s pretty well the point that Kohler is making.
Keith Orchison, director of consultancy Coolibah Pty Ltd and editor of Powering Australia yearbook, was chief executive of two national energy associations from 1980 to 2003. He was made a Member of the Order of Australia for services to the energy industry in 2004.