Anglo-Dutch company’s search for resources in the Arctic is a sign that the world is running out of options for new oil reserves
In his critically acclaimed 2005 book ‘Twilight in the Desert’, the prominent oil economist Matthew R. Simmons predicted that Saudi Arabia’s oil wells would soon run dry.
His argument was based on the age of the seven main fields, which the kingdom still to this day depends upon to pump the bulk of its 10m barrels per day (bpd) of crude. These fields in the main have been producing for over a generation and, despite official figures placing Saudi Arabia’s proven reserves at over 260bn barrels, Mr Simmons argued that the kingdom would struggle to increase its output to keep pace with the projected increases in the demand over the next half century marking the beginning of a period known as “peak oil”.
The kingdom, which enjoys some of the lowest production costs in the world, has the capacity to pump 12m bpd if required and shows no signs of slowing down. However, the big question remains whether the Middle East’s energy superpower along with the world’s other major oil producers will be able to keep up with the expected increases in demand over the next 25 years?
Protests won’t halt rush for Arctic oil (Image: REUTERS/J. Redmond)
By 2040, the Organisation of the Petroleum Exporting Countries (Opec) predicts the world will need to produce 111m bpd of crude to meet world demand. That represents another 20m bpd on top of existing output which means the world needs to find and develop and additional 800,000 bpd of oil a year on average to keep up with supply. To put that challenge into perspective, this figure represents repeating the US shale oil boom all over again, or finding a developing a new North Sea 20 times over.
Although, Mr Simmons was perhaps wrong in focusing on a potential collapse in Saudi Arabia’s oil production he was right in warning about the dangers of “Peak Oil” but too early in predicting its onset. That time is now upon us. Despite, oil prices being forced lower over the last six months the world is entering into a “peak oil” scenario whereby the cost of a barrel could feasibly quadruple to around $200 per barrel over the next 10 years.
Read more: Telegraph