THE ENERGY CLIFF APPROACHES: World Oil & Gas Discoveries Continue To Decline

By the SRSrocco Report,

As the world continues to burn energy like there is no tomorrow, global oil and gas discoveries fell to another low in 2017.  And to make matters worse, world oil investment has dropped 45% from its peak in 2014.  If the world oil industry doesn't increase its capital expenditures significantly, we are going to hit the Energy Cliff much sooner than later.

According to Rystad Energy, total global conventional oil and gas discoveries fell to a low of 6.7 billion barrels of oil equivalent (Boe).  To arrive at a Boe, Rystad Energy converts natural gas to a barrel of oil equivalent.  In 2012, the world discovered 30 billion Boe of oil and gas versus the 6.7 billion Boe last year:

In the article, All-time low for discovered resources in 2017, Rystad reports, it stated the following:

“We haven’t seen anything like this since the 1940s,” says Sonia Mladá Passos, senior analyst at Rystad Energy. “The discovered volumes averaged at ~550 MMboe per month. The most worrisome is the fact that the reserve replacement ratio in the current year reached only 11% (for oil and gas combined) - compared to over 50% in 2012.” According to Rystad’s analysis, 2006 was the last year when reserve replacement ratio reached 100%.

The critical information in the quote above is that the world only replaced 11% of its oil and gas consumption last year compared to 50% in 2012.  However, the article goes on to say that the last time global oil and gas discoveries were 100% of consumption was back in 2006.  So, even at high $100+ oil prices in 2013 and 2014, oil and gas discoveries were only 25% of global consumption.

As I mentioned at the beginning of the article, global oil capital investment has fallen right at the very time we need it the most.  In the EIA's International Energy Outlook 2017, world oil capital investment fell 45% to $316 billion in 2016 versus $578 billion in 2014:

In just ten years (2007-2016), the world oil industry spent $4.1 trillion to maintain and grow production.  However, as shown in the first chart, global conventional oil and gas discoveries fell to a new low of 6.7 billion Boe in 2017.  So, even though more money is being spent, the world isn't finding much more new oil.

I believe we are going to start running into serious trouble, first in the U.S. Shale Energy Industry, and then globally, within the next 1-3 years.  The major global oil companies have been forced to cut capital expenditures to remain profitable and to provide free cash flow.  Unfortunately, this will impact oil production in the coming years.

Thus, the world will be facing the Energy Cliff much sooner than later.

Check back for new articles and updates at the SRSrocco Report.

Comments

Superlat He-He That Tickles Sun, 07/08/2018 - 16:11 Permalink

THis is nonsense. Venezuela has scads more oil they discovered recently. They just need to get that country on deck. Iraq hasn't even been properly explored. Iran has fuel up the yin yang. Much of the developed world is working to get off oil to whatever extent possible, not just for the warming that IS happening, despite right-wing idiocy, but also because of local pollution and health effects, not to mention the entire cycle of fossil fuels is stupidly inefficient, though they will always be critically needed through winters and heat waves, take your pick.

Regardless, the sky was falling on oil 15 years again, and that didn't happen. It's not going to happen.

In reply to by He-He That Tickles

gammab0y Superlat Mon, 07/09/2018 - 04:22 Permalink

I'm curious how many of your dreamy, non-hydrocarbon energy sources have a positive EROEI?

In other words, how many would be economic in the absence of subsidies or repressed long-term interest rates?

Biofuels are a joke.  I currently know of 1 wind project in Europe that is profitable without subsidies and that is even with massive overcapacity in the production of turbines.  Solar works in some cases, thanks to low LT interest rates and massive industrial overcapacity, but it feels like all the money hemorraghed in that industry has been an implicit subsidy.

Let's say Iran/Iraq/Venezuela can't get sorted, do you really expect non-fossil-fuels to save the day?

 

 

In reply to by Superlat

ebear gammab0y Mon, 07/09/2018 - 08:40 Permalink

Plenty of coal in the ground. 

Coal can be converted to motor fuel:

en.wikipedia.org/wiki/Fischer%E2%80%93Tropsch_process

The energy to run the process can come from thorium reactors.

Diesel and jet fuel can be produced this way, so there's your aviation, marine and ground transportation.  Natural gas can be made in a related process, so there's your home heat.

Pretty much everything else runs on electricity, which can be hydro or nuclear, so no shortage there.

Of course more people will be taking the bus.

In reply to by gammab0y

Nuclear Winter He-He That Tickles Mon, 07/09/2018 - 16:06 Permalink

There's 1 place left in the world and it's easy to get to, north of the Arctic circle, which hasn't been explored yet, but will be by 2022. Lofoten Islands, Norway, a world heritage site with tremendous cod fishing grounds that have fed people going back to the Viking days of 650 AD.

http://priceofoil.org/2018/01/15/campaign-against-oil-drilling-in-norways-lofoten-islands-wins-another-three-years/

https://www.reuters.com/article/us-norway-government-oil/norways-lofoten-region-to-remain-off-limits-to-oil-firms-government-idUSKBN1F30QT 

And when the first rigs are floated offshore, I will be there drinking plenty Viking ale from Mack Beer, brewed in the area with pure spring water from the mountains and blessed by Odin and the Valkyrie battle maidens...

http://www.mack.no/en/history

SKOAL!!!

 

 

In reply to by He-He That Tickles

JamcaicanMeAfraid Sun, 07/08/2018 - 12:56 Permalink

The decrease in investment is a hang over effect from the Obama administration's anti-business policies. Another symptom of Obama's anti-capitalist administration is the shortage of capital equipment and personnel that the oil companies are experiencing at this moment. Not to mention the number of new fields of discovery that were deemed off limits by that administration. It'll take a few years to rectify those egregious ideological policies.

 

SRSrocco JamcaicanMeAfraid Sun, 07/08/2018 - 13:09 Permalink

JamcaidanMeAfriad,

Good idea to read the article and pay close attention to the title of the chart that stated "GLOBAL OIL INVESTMENT."  While Obama may have had some impact on U.S. oil capital expenditures, I would guarantee he had little impact on global oil investment.

Lastly, watch for U.S. oil production to plummet by 50-75% by 2025, with or without new discoveries.

steve

In reply to by JamcaicanMeAfraid

El Vaquero SRSrocco Sun, 07/08/2018 - 13:26 Permalink

Last time I checked, and this data is probably 6-12 months old, if we were to stop all US drilling and fracking today, in one month's time, US tight oil production would drop by 350,000 bbl/day.  That tells you how much we have to drill to maintain production, and as production goes up, so will that number.  IIRC, Eagle Ford tight oil wells have a yoy depletion rate of 75%-80%. 

In reply to by SRSrocco

SRSrocco El Vaquero Sun, 07/08/2018 - 15:37 Permalink

El Vaquero,

In my Shale Oil Ponzi Scheme video: https://www.youtube.com/watch?v=E_He0650klE&t

I provided a chart that showed how total Eagle Ford Shale Oil Field would have fallen 75% within 3 years if all drilling for new wells ceased.  According to the data, the Eagle Ford shale oil production would have declined from over 1.6 million barrels per day at beginning of 2015 to less than 400,000 barrels per day by the beginning of 2018.

steve

In reply to by El Vaquero

forexskin SRSrocco Sun, 07/08/2018 - 16:12 Permalink

with all due respect, this boy has been crying wolf for quite a while - even doom porn has a shelf life.

Life After The Oil Crash, or LATOC, was a very active Peak Oil forum in the mid to late 2000's. I was not active in that particular community when I first became Peak Oil aware in 2004, but I stopped in often for the latest in all things doom, especially the news roundup.

Matt Savinar was very much the driving force behind the site, and as time went on he made it pretty clear that he was not going to tolerate what he called "asshats" on his forum, which in general translated to "if you aren't convinced that we are all doomed any day now then don't bother".

if / when this manifests in a way that has a significant impact, it is guaranteed to meet the public as some other kind of managed crisis. who owns the media?

In reply to by SRSrocco

mkkby forexskin Sun, 07/08/2018 - 17:53 Permalink

Africa, the largest continent, has barely been explored.  Prices will go much higher as current fields run down and new lands must be developed.  The higher prices will provide the incentive to increase investment.

As prices go higher substitution will moderate prices back down.  Commie states like china and california are already forcing people to switch to coal cars.

In reply to by forexskin

Lore mkkby Sun, 07/08/2018 - 18:33 Permalink

Have you considered just how high prices have to go, to make alternatives comparatively economical? 

Where does that leave most of present-day society?  Picture it. 

Governments misallocate capital and feed imbalances. They cannot change EROI.

Policymakers must break their bullshit Agenda 21 programming.  It handicaps the discourse.

If there is a pipeline that needs building, BUILD IT NOW.  If there is a dam to be built, HURRY. 

We have about 3-5 years left.

In reply to by mkkby

shortonoil SRSrocco Sun, 07/08/2018 - 16:00 Permalink

Hi Steve, this is exactly what we have been talking about for the last 8 years. To make matters worse there seems to be a completely irrational belief that Shale will save the day. Outside of the fact that shale is not processable without heavier crude, and it is at best energy neutral, and probably negative, it is also long term unaffordable. There are 1.7 million Shale wells in the US. Over the next 5 years 1.4 million of those wells will have to be replaced to just keep production even. That will be $6.2 trillion even if done on the cheap. $6.2 trillion is equal to the total cost of all the finished product that will be consumed by the US for the next 12.8 years (@ $75/barrel). Expending 12.8 years of sales revenue to produce 5 years of oil is just not going to happen!

 

There seems to be a black out on this terrible situation. Some of that may be just plain ignorance, but I suspect that the main reason is that it is politically unspeakable. For that reason nothing is being spoken. As I have been saying for some time no one should expect big oil, big government, or big anything to come riding to the rescue. The individual is now completely on their own. Chose your options with discretion.

BW

http://www.thehillsgroup.org/

In reply to by SRSrocco

shortonoil Winston Churchill Mon, 07/09/2018 - 09:04 Permalink

You are without a doubt correct; the PTB are very aware of the situation. It doesn't take much brain power to realize that pumping 9 barrels for every 1 found is a losing proposition. Petroleum has been their primary route to fabulous wealth for the last 150 years. Now that the Petroleum Tooth Fairy is about to stop making deliveries the game for them is to come out the back side possessing the majority of existing assets. First they drove interest rates down (with the excuse of stimulating the economy) to drive wealth away from the middle class. Most of the world's pension funds have been stripped to the bone. That allowed them to buy up most of the existing assets with their printed money. 88% of the S&P is now held by 3 companies (guess who owns them?). Phase two - is now to drive capital out of the emerging markets by pushing interest rates back up, and raising the price of oil beyond its affordability level. That is pushing over $4 trillion per year in their direction. That will continue until most of the world is back to the Stone Age, or we have blown our self off the face of the planet.

 

Assuming, that the blowing up part is avoided, that leaves an opportunity for the individual. The main problem for the PTB is that they are huge. Once they initiate a course of action they can't change it without taking a huge loss. Front running them is now the only game in town, and we have a pretty good idea of what they are going to do. Of course, the devil is in the details.

 

BW

http://www.thehillsgroup.org/

In reply to by Winston Churchill

Zen Xenu SRSrocco Sun, 07/08/2018 - 19:48 Permalink

@SRSrocco, U.S. Tight Oil depends on cheap credit.  Regardless of oil prices.

Once cheap credit dries up and the previous debts are unable to be paid by drilling new wells, the entire scheme falls apart.

Oil prices do not drive U.S. Tight Oil as much as cheap credit from easy loans.

Eventually, U S. Tight Oil using new credit cards to pay debts on old credit cards will catch up with a vengence.  Rising interest rates will be the catalyst.  Rising oil prices only prolong the increasing debt.

In reply to by SRSrocco

MrNoItAll SRSrocco Sun, 07/08/2018 - 21:21 Permalink

Didn't the EIA publish something not long ago stating their concerns that we could see oil shortages by 2020? And around the same time, I recall that the Saudi Oil Minister came out and stated that without more investment, we would likely see oil shortages by 2020. And then at the recent OPEC meeting, I believe it was the Oil Minister from UAE who stated that we need to find a new North Seas equivalent oil field EVERY YEAR to meet projected demand, which of course is not going to happen. It has been a long slow grind since 2008 to get to this point, but from here on out I anticipate that things will start unraveling at an ever faster pace. Big changes on the way. But one thing that will NEVER happen is that the POTUS or some other world leader comes out and says we are running short on energy. Instead it will be Trade Wars, the damned Russians or some other lame propaganda -- anything but the truth.

In reply to by SRSrocco

Cloud9.5 Anonymous_Bene… Mon, 07/09/2018 - 07:23 Permalink

This is a synopsis of the German Army study produced in 2010.  https://www.youtube.com/watch?v=ZyUe7w1gDZo

If you want the English translation of the study in its entirety, it can be found here:   https://www.permaculturenews.org/files/Peak%20Oil_Study%20EN.pdf

The mitigation section of the study was most telling.  It simply stated that local sustainable economies would replace the modern era.  These economies included local food production and energy production.  As this process unfolds, I simply do not see how a high rise is going to remain habitable.

In reply to by Anonymous_Bene…

shortonoil SRSrocco Mon, 07/09/2018 - 11:41 Permalink

1 to 3 years is a very reasonable estimate. When the cost of drilling new wells, to compensate for their high decline rate, exceeds the benefit (which initially was to help keep the price of crude down so that the refiners raw material cost didn't break them) that drilling will cease.

 

But as Zen Xenu stated:

 

"@SRSrocco, U.S. Tight Oil depends on cheap credit. Regardless of oil prices."

 

To keep capital flowing out of the EM interest rates will have to continue their movement higher, and oil prices will have to stay elevated. This whole scenario is about moving the last of the available capital to the pockets of the PTB. With the Etp Model telling us that it is now requiring 58.5% of the energy in a unit of oil to produce petroleum and its products, the days of new capital formation are over. The PTB are going to go after the existing assets in a big way. If that means feeding the Shale industry to the fish, so be it. Higher crude prices are not going to help the industry at all, their cost of production goes up and down with the price of oil. There has been no relationship between the price of crude, and its production rate since oil reached about $20 a barrel.

 

http://i64.tinypic.com/fw9ol.jpg

 

The only variable effecting the production rate since about 1990 has been demand. With the EM going into a depression (compliments of the PTB) that is going to be shrinking. The energy equations tells us that passed 2030 that acquiring wealth is going to be a something of a process of slim pickings, to an exercise in futility. Now is an excellent time to find a safe haven for what you have, and if you don't have it; find it.

 

BW

http://www.thehillsgroup.org/

In reply to by SRSrocco

MrNoItAll shortonoil Mon, 07/09/2018 - 12:51 Permalink

There's only so much juice that can be squeezed out of EM without punching a big hole in the global economy. Not that they won't squeeze as much out as they possibly can, and then some. We are clearly in the end game stage, moving rapidly toward the ultimate conclusion. Things are becoming ever more interesting -- and frightening.

In reply to by shortonoil

EddieLomax JamcaicanMeAfraid Mon, 07/09/2018 - 04:33 Permalink

Zero hedge put a news story a while ago where (I think 2016) the US oil industry lost more in that it earned in the previous 7 years (mining in general), so more investment wouldn't have been coming in the US anyway - the price wasn't high enough to justify it.

Worldwide we are going to see some almightly crunch, whether it will arrive after 2020 will be seen.  Ironically it might save Trump anyway if the world is seen to be beset by a oil supply crunch since its hard to blame that on him.

In reply to by JamcaicanMeAfraid

Chief Joesph Sun, 07/08/2018 - 13:02 Permalink

The U.S. needs to get off its dead ass and start developing better batteries, solar power, and other alternative energy sources.  This was talked about in 1973, during the Oil Embargo days, and its just astonishing the U.S. has done little since to ween itself off of oil. And now we now have a tariff against Chinese made solar panels.  DUH!!!  How dumb can you get?

El Vaquero Chief Joesph Sun, 07/08/2018 - 13:31 Permalink

Look at the energy density of those power sources.  You'll never run an industrial civilization off of them.  Electric cars may be great for zipping a couple of people around town from day to day, but you're never going to run the large mining and shipping equipment needed for our society.  If you want to do that, you're going to have to develop viable breeder reactors and the technology to manufacture liquid fuels with that energy - and this is doable. 

In reply to by Chief Joesph

bshirley1968 El Vaquero Sun, 07/08/2018 - 14:10 Permalink

Right. There is nothing.....NOTHING....that can replace oil and gas as it is used and utilized by the modern industrial society. Nothing......

What needs to happen right now is a steady rise in prices that will condition our population to start learning to do with less cheap, easy energy. We have got to curb usage to give society a chance to begin to learn another way.

The major obstacle to doing this responsible, rational action? The egregious, criminal banking system that has gotten the world awash in debt to feed their greed. Any cut back in the use of energy will destroy the economy and their gravy train.

In reply to by El Vaquero