There are two stories on oil yesterday that seem to contradict each other.
First, from the New York Times, we have …
Oil Industry Sets a Brisk Pace of New Discoveries
The oil industry has been on a hot streak this year, thanks to a series of major discoveries that have rekindled a sense of excitement across the petroleum sector, despite falling prices and a tough economy.
More than 200 discoveries have been reported so far this year in dozens of countries, including northern Iraq’s Kurdish region, Australia, Israel, Iran, Brazil, Norway, Ghana and Russia. They have been made by international giants, like Exxon Mobil, but also by industry minnows, like Tullow Oil.
Just this month, BP said that it found a giant deepwater field that might turn out to be the biggest oil discovery ever in the Gulf of Mexico, while Anadarko announced a large find in an “exciting and highly prospective” region off Sierra Leone.
It is normal for companies to discover billions of barrels of new oil every year, but this year’s pace is unusually brisk. New oil discoveries have totaled about 10 billion barrels in the first half of the year, according to IHS Cambridge Energy Research Associates. If discoveries continue at that pace through year-end, they are likely to reach the highest level since 2000.
XX Sean’s note — that sounds pretty good, eh? But also published yesterday …
2008 oil reserve replacement lags production: study
Global oil and natural gas reserve replacement fell to 88 percent of production in 2008, despite a 23 percent increase in development spending in that year, according to a study released on Wednesday.
That was the first year since 2004 when global production was not replaced, according to the study done by research firm IHS Herold Inc and upstream consultant Harrison Lovegrove & Co Ltd.
“Total worldwide oil and gas reserves were 0.4 percent lower at year end 2008 as a 3-percent increase in gas reserves was more than offset by a 4.4-billion barrel decline in oil reserves,” the companies said in a statement.
Perhaps it’s because the two articles are talking past each other. The story quoting IHS Herold talks about actual reserve replacement; the New York Times piece quotes Cambridge Energy Research Associates, which talks about new discoveries, and discoveries can’t be added to reserves without further exploration. And indeed, further exploration may show that the “discovery” wasn’t much of a find at all.
Personally, I think oil is going lower in the short term and much higher in the longer term.
Related Posts
- Still Bearish on the Oils (03/05/09)
- Oil Prices Should Go Lower Short-Term (02/01/10)
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