Blogs & Comment

Wow, I didn't think it would be that big...

In a recent issue of Canadian Businesswe ran a storyquoting Jim Gray, the former CEO of Canadian Hunter Exploration. At the time he said he was worried about the possibility of declines in liquid fuels production as a result of ongoing depletion in many of the world’s largest oil fields. He said at the time that he would be closely watching the release of an IEA report on decline rates in those fields, a report that was to be released in November.
Well, woke up this morning to notice a draft of the report had been leaked to the Financial Times, and it looks like Mr. Gray couldn’t have been any more correct. He is dead on in fact. He suggested that the organization preparing the report, the IEA, was pre-conditioning the public for bad news. And it turns out the news is bad. According to the report the real decline rate in existing fields is an astounding 9.1%.
That’s a higher figure than most have been talking about. Cambridge Energy Research Associates suggested in a report this past spring that the decline rate was just above 6%, while the CEO of oil field services firm Schlumberger has suggested the decline rate could be closer to 8%. With the IEA suggesting decline is over 9%, we seem to have solid confirmation from a trusted organization that peak oil issues are going to come back to the fore in the years ahead.
According to the report, the current drop-off in prices will keep demand low. But the issue will be back once growth picks up again. The fact many energy projects are now being canceled because of low prices will only exacerbate a looming supply shock. Oil is already up $4 on the news.
Here’s the storyin the FT.