Tuesday, August 25, 2009

Michael Lynch's Pinheaded Column (Part Two)

Continued from earlier today ....

"The global average for water in oil field yields is estimated to be as high as 75 percent." -- Lynch

Just to finish this stunningly stupid paragraph by Lynch, the fact that the global average is 75 % pulls at the disconcerting truth that it's a glib (if not entirely oily) reflection on the state of all stages of oil fields. Time was when you could put a straw in the dirt of Pennsylvania or sand in Saudi Arabia and it was transformed into the backyard of the Beverly Hillbillies, pre-move. To almost a derrick, they're now running on power and fumes. There's still a lot of oil to be sucked up, drilled at, and converted, but there's a fundamental block on the part of sleight-of-hand shills like Lynch to see the other side of the equation. Production has crested, and is in that precarious, queasy top-of-the-roller-coaster stage of the ride. It can even hover there for years, but in the meantime consumption is rising, and will continue to rise. World production has dropped very slightly since May 2005, and even though it's been over four years since then, it's too early to call it a peak. The momentum, though, has clearly stopped, and, unless Mary Poppins or Baby Jesus appears from behind a deep sea platform, permanently so.

"Another critic, a prominent consultant and investor named Matthew Simmons, has raised concerns over oil engineers using “fuzzy logic” to estimate reservoir holdings. But fuzzy logic is a programming method that has been used since I was in graduate school in situations where the factors are hazy and variable — everything from physical science to international relations — and its track record in oil geology has been quite good." -- Lynch

Well, which is it? When it's the Peak Oilers compiling data, the numbers are "vague", the analyses are "poor", the information "anecdotal". When it's oil geologists (many who are actually Peakers, but you wouldn't get that from Lynch), the track record is good, not because it points to verifiable findings, but because it's a proven "programming method" itself! Of course, we have another non sequitur at the quote's end, rather than anything substantive.

"for the most part the peak-oil crowd rests its case on three major claims: that the world is discovering only one barrel for every three or four produced; that political instability in oil-producing countries puts us at an unprecedented risk of having the spigots turned off; and that we have already used half of the two trillion barrels of oil that the earth contained.

Let’s take the rate-of-discovery argument first: it is a statement that reflects ignorance of industry terminology. When a new field is found, it is given a size estimate that indicates how much is thought to be recoverable at that point in time. But as years pass, the estimate is almost always revised upward, either because more pockets of oil are found in the field or because new technology makes it possible to extract oil that was previously unreachable." -- Lynch

When what new field is found? The geologists themselves -- Christ in a cookie! -- Chevron has admitted that production finds are a dead end. That's why money for exploration has dwindled to a drip. The mega-companies didn't get that way by being stupid. The front line geologists know that the costs allocated to "finds" don't come close to what is found.

From Chevron's Vice-Chairman Peter Robertson: "people will ask, ‘Why in the world would Chevron be encouraging its customers to use less energy?’ After all, we sell energy – that’s our product… In many ways, a lot of us are concerned about the ability of the world’s supply system to provide the energy that people need." A somewhat more revealing view than the smokescreen from Exxon. But then, again, Chevron (and Shell with similar comments) aren't just admitting this from global concern, but from a proactive intelligence. The oil giants have become the bloated corporations they are today by viciously buying out smaller companies, and by forcing other companies to cough up their alternative successes. This is happening now with so-called alternative fuels. If (a very big if) an alternative energy source gets any traction with cost reduction and research breakthroughs, you can be sure that, with the help of the federal gov't (certainly in the U.S.) , the spoils will be siphoned off to the megacorps.

As for the rest of Lynch's "reasoning", if estimates are revised upwards, it's akin to the Kuwaitis shrewd positioning from 20 + years ago: when reserves are marked higher, exporting becomes easier since tensions are eased. The importers (the U.S., obviously, but the vast majority of countries are now net-importing) can plan for a steady flow so that supply lines are set since contracts to refineries are made for the long-term, and for revenue accruing for those receivers not beginning for many months.

If "new pockets of oil" are found, they're almost always dribbles from the core extraction. In any event, it's not a recipe for readjusting to any significant level, and it's not surprising that Lynch doesn't supply any numbers to back up this vague -- oops, I mean respectable "programming method" -- tack.

As for the new technology making it possible to extract oil that was previously unreachable, this is a crock, and if Lynch had been following any current stories in this vein, or as seems as likely, had reported on what he had read, the reader would see that the opposite is the case. Remember "Deep Jack" or whatever catchy, ballsy name the oil liars gave it? In the Gulf of Mexico, one or two years ago, a "find" of oil was gushed over as if it would have solved humanity's needs for oil for the next two hundred years. The deep drilling methods were said to be able to suck up this "gigantic" compartment of goo. Then reality set in: first problem was that the drillers couldn't even locate the "find" in any meaningful way. Second: the "boon" was much less than initially reported. Third, and not least: extraction procedure made it impractical, even with all the fancy equipment and methodology. The oil was (is) thirteen miles below the sea's surface, and even if all hurdles were overcome, the rather inconvenient fact of energy cost (that nasty ERoEI again) rendered any production a net loss. Notice, also, how quickly the story dropped off the news rolls when these details became more clear.

"In truth, the combination of new discoveries and revisions to size estimates of older fields has been keeping pace with production for many years."-- Lynch

Don't you just love sophists who use phrases like "in truth"? Well, what follows must necessarily be true, then (the reader says, scratching his hillbilly head while picking his teeth with a whittling stick).

Lynch starts boldly in order to cover up the most egregiously disgusting sentence in this urine-yellow journalistic sludge.

Mexico's Cantarell, the Earth's 2nd largest oil field, has been declining at an alarming rate, by many estimates, including their national oil company, by 15% - 20% per year. Mexico will be a net importer soon, and will cease exporting any oil in 2-3 years (Mexico is currently #3 amongst oil exporters to the U.S.). This brings up another point, a recent and frightening one for all oil importers. Exporters -- Russia and OPEC have certainly made many moves in this regard -- will be reducing their part of the transaction, even though they're able to sell, since they increasingly want to keep their oil within their own borders. Think that won't add to international tensions, resulting in more, and more ferocious, wars? The wars of the 21st century will be dominated by resource discrepancies, not religious differences.

The many other examples of field depletion by giants first discovered over half a century ago are numerous and ominous. The similarly falling graph-lines are available to anyone who wants a peek. Just as alarming, though not as "newsworthy", are the many very small finds where an initial draw of several million barrels has quickly petered out. In short, they don't make 'em like they used to.


The rest to follow.

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