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By Robert Rapier on Aug 4, 2010 with 32 responses

The Beginning of the End?

The Leak Appears to be Sealed

Today comes news that there is light at the end of the tunnel over the leak in the Gulf of Mexico: Allen: ‘High confidence’ no more oil will flow into Gulf

Retired Coast Guard admiral Thad Allen said Wednesday he has “high confidence” no more oil will leak from BP’s Gulf of Mexico well. Hours earlier, BP announced that the well had reached “static condition” after heavy drilling mud was pumped into it.

This is without a doubt good news. However, the longer term ramifications remain the same in my mind:

  • BP is going to have a very difficult time repairing their brand. I still believe that a substantial fraction of their assets — if not all of them — will eventually be operated under a different brand than BP. (More details on my reasoning at The Demise of BP).
  • BP has a very long and unpleasant series of fines and lawsuits ahead of them (Mexico is now planning to sue), which will keep them in the news for years to come.
  • The backlash against offshore drilling will have real implications with respect to slowing and killing drilling projects as stricter regulations are implemented.
  • Some promising areas will never be developed because the risks will be deemed to be too high.
  • The decline curve for global oil production will almost certainly be steeper as a result of this incident.
  • The long-term environmental implications won’t be clear for a number of years. (An estimated quarter of the oil spilled — over a million barrels — is still lurking in the environment).

New Rapid Response System

As a result of the incident, a number of U.S. oil companies, including my former employer ConocoPhillips, recently announced a $1 billion investment in a containment system to mitigate against this possibility in the future: New Oil Spill Containment System to Protect Gulf of Mexico Planned by Major Oil Companies

WASHINGTON, D.C., July 21, 2010 – A plan to build and deploy a rapid response system that will be available to capture and contain oil in the event of a potential future underwater well blowout in the deepwater Gulf of Mexico was announced today by Chevron, ConocoPhillips, ExxonMobil and Shell.

The new system will be flexible, adaptable and able to begin mobilization within 24 hours and can be used on a wide range of well designs and equipment, oil and natural gas flow rates and weather conditions. The new system will be engineered to be used in deepwater depths up to 10,000 feet and have initial capacity to contain 100,000 barrels per day with potential for expansion.

The companies have committed $1 billion to fund the initial costs of the system. Additional operational and maintenance costs for the subsea and modular processing equipment, contracts with existing operating vessels in the Gulf of Mexico and any potential new vessels that may be constructed will increase this cost commitment.

I don’t know whether BP chose to opt out, or the companies didn’t want BP to be associated with this new system. (Update: I was just informed by e-mail that BP was tied up with the leak, and would have an opportunity to join the effort). Of course the cynic in me thinks this is a bit like buying homeowner’s insurance after your house burns down. On the other hand, sometimes we just don’t realize how much risk mitigation we need until disaster strikes. In a society where houses had never burned, we might not think we needed insurance against fire until one did burn.

I don’t mean to make light of the investment in the new system. After this disaster it became painfully obvious to all that rapid response to a deepwater leak wasn’t something for which the oil industry was equipped. So hopefully this new rapid response system can minimize the consequences should such an event take place in the future. However, I am sure the industry will also spend a lot of time addressing the root causes of this incident (and looking for other hidden risks) to make sure that rapid response system is never called into action.

After all, the very survival of the U.S. oil industry is at stake. Their access to oil around the world is becoming more restricted year after year, and offshore was one of the bright prospects for the industry. This incident dimmed that bright prospect, so the industry has to be proactive in order to win back confidence that they can safely develop offshore resources.

As oil prices climb, I do suspect we will start to hear “Drill, baby drill” once more. People have a short term memory of these sorts of things when their pocketbooks are impacted. But states will look after their self-interests. I can’t see Florida or California opening up new areas to drilling for the foreseeable future, no matter how much the rest of the country might scream for it.

The Fear Mongers

I was amazed throughout this incident at the number of people willing to listen to the fear mongers. I specifically addressed Matt Simmons with a couple of posts, but there were lots of others like Mike Ruppert spinning incredibly doomerish scenarios:

I believe that the leaks are devastating for all life in the Gulf and that large portions of the Gulf will be dead zones from seabed to surface within maybe six months. I believe that an announcement of a pending nuclear detonation will come within a week to ten days. I predict that US Continuity of Government provisions will be activated and that FEMA will, before end of summer, be placed in complete control of the Southeast United States… limited martial law.

That was from May 29th. I think people should be held accountable for the things they say and write (myself included), particularly when it impacts large numbers of people. To my knowledge, there has been no mea culpa for just how silly these particular predictions were, but then again you can’t get Ruppert’s nuggets of wisdom for free any more. Shortly after making that prediction he started charging people $10 per month for this stuff.

Gulf Coast residents were terrorized by some of the far-fetched claims, and the media was complicit by continuing to bring people like Simmons on because they could count on him to say jaw-dropping things. But that is irresponsible journalism. Once Simmons started to make some of these claims, the media should have gone out to look for sources to back them up or discredit them. Instead, they continued to bring Simmons on and he continued to make claims that got ever more outrageous.

Speaking of Simmons, I do want to clear up one item. The article that I wrote on Simmons was called Is Matt Simmons Credible? I chose that title for a very specific reason. In that essay, what I did was point to other incidents in which his credibility had been suspect because he was shooting from the hip. It was not my intention to debunk his specific claims in that essay (although I did debunk some earlier claims in a 2008 essay). However, that essay was picked up far and wide and reprinted, and yet that was the complaint some had: “You didn’t actually debunk Simmons’ claims.”

That wasn’t the purpose of that particular essay. I was saying “There is a history here, so treat those claims skeptically.” It was a general warning against some of the things that were being said — or might be said in the future. On the other hand, the article that I co-authored at The Oil Drum — A Critical Examination of Matt Simmons’ Claims on the Deepwater Spillwas a debunking. The following claims of Simmons were addressed:

  1. The real leak is seven miles away.
  2. Oil is flowing at 120,000 barrels/day.
  3. The real spill has caused a lake of oil larger than Washington state.
  4. Methane is lethal and toxic.
  5. Use of a small bore nuclear device is the “only option” to stop the flow of oil.

In my opinion, each claim was thoroughly debunked. Some were of course errors of fact and didn’t require a lengthy rebuttal: Methane is not toxic, and it is certainly not more toxic than hydrogen sulfide (which is highly toxic) as Simmons claimed. Yet some still wanted to give Simmons all benefit of the doubt based on his history as a popular peak oil spokesmen. My view on that matter is simple: Sacred cows are for religions, and they impede fact-based discussions.

Conclusions

This story will continue to play out for years, and there are many lessons learned. Some are obvious, but there is one that I hope we won’t soon forget: The reason that companies like BP develop oil reserves in such extreme environments is that consumers demand the cheapest gasoline they can find. The oil industry does what they do to make money, but as long as we continue to line up for the product they provide, we all bear responsibility for oil-related externalities.

  1. By Benny BND Cole on August 4, 2010 at 7:41 pm

    I enjoyed this commentary by RR. I have to especially agree with the sentiment as long as you drive a car (and I do) you can’t waa-waa too much about oil drilling. As comedian Bill Maher once asked, “If you could solve global warming, but you would have to give up the remote to your TV, would you do it?”
    I have been a supporter of offshore drilling, with the proviso that offshore Palm Beach FL, and Newport Beach CA. be drilled extensively and immediately.
    Is there something truly hypocritical about Floridians voting in Republicans, and then banning offshore drilling in their state? But still demanding gasoline at the pump?
    But after the BP spill, my acceptance of offshore drilling has gone down. I had assumed the industry had already developed a rapid response team. Evidently, there was basically zero idea what to do for several weeks. Even more oddly, apparently better skimming equipment is being developed as we speak! I welcome innovation, but jeez, some of this stuff should be proven by now through industry testing.
    Maybe this will lead to less offshore drilling, but I tend to doubt it. Oil at more than $80 a barrel is highly profitable. Nobody wants to stifle the economy now.
    Lastly, is there not some way we could make sure the lawyers do not get rich from this spill?

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  2. By jcsr on August 4, 2010 at 7:59 pm

    The plugging of this terrible well is a great relief to many of us, however there is still a controversy over the toxicity of the dispersant used and the damage it may have caused.
    I am looking forward to an explanation from you as a Chemical Engineer about this subject. Thank you for any light you can shed.

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  3. By Kit P on August 4, 2010 at 8:26 pm

    However, I am sure the
    industry will also spend a lot of time addressing the root causes of
    this incident (and looking for other hidden risks) to make sure that
    rapid response system is never called into action.

     

    I would interested in
    reading the RCA to see if there are new lessons to be learned or just
    a failure to learn the lessons of the past.

     

    Piper Alpha:
    http://en.wikipedia.org/wiki/Piper_Alpha

     

    An explosion and resulting
    fire destroyed it on July 6, 1988, killing 167 men, with only 59
    survivors.

     

    What can one say about this?

     

    I was amazed throughout this
    incident at the number of people willing to listen to the fear
    mongers.

     

    You should be happy that oil
    does not cause cancer.

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  4. By carbonbridge on August 4, 2010 at 8:39 pm

    Robert Rapier said:   The Leak Appears to be Sealed

    Today comes news that there is light at the end of the tunnel over the leak in the Gulf of Mexico:

    RR:  Thank you for bringing to the forefront some of the very scary claims being made by Mr. Simmons and a host of others.  And thank you also for participating with other energy technologists over at the Oil Drum in critically examining some of these claims being spouted by doomers.  My own email in-box has been receiving a tremendous amount of scary predictions — FEMA, people being poisoned, mass evacuations, and more, etc.  Lots of people have read these same fearful claims and folks in my own loop were asking me for critical opinions regarding what I interpreted from these same fearful claims.  It was hard to give anybody a definate answer except “I don’t know” concerning various outcomes…

    And now that this Oil Gusher may be on its way to being finally capped, we can all take just ONE short breath of air WHILE we collectively resume cleanup activiies yet ponder continued reprocussions of this event.  As you indicate, this oil gusher will have major impacts on further offshore drilling and of course, I too hope that the oil industry collectively gets its act better together in the forefront, in the middle and in its joint ability to better respond to further incidents.  If anything, many of us have learned that there are 30,000+ capped oil well drillholes in the Gulf and that there are 4,000+ offshore platforms operating there.  This is rather eye opening data…  Unless one lives and works in this region, it is otherwise hard to interpret — just the same as going to war for oil in Iraq isn’t universally understood nor excepted as fact.

    Today, my own concern lies principally with the ecological health of the oceans and the food chain which it propagates.  I cannot yet begin to predict anything concrete relative to the health and well-being of this ocean enviornment, its inhabitants and relatively near-by land critters and birds.  I can only hope for the best and wonder IF common citizens will learn anything more about hydrocarbon crude oil which doesn’t mix nor dilute in water.  We all are to blame as we all collectively combust petroleum-derived fuels.  Yet there are game changing, profitable and biodegradable alternatives such as C1 or C1-C10 alcohols which are little understood.

    -Mark

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  5. By rrapier on August 4, 2010 at 8:41 pm

    As comedian Bill Maher once asked, “If you could solve global warming, but you would have to give up the remote to your TV, would you do it?”

    I don’t care much for Maher, but that is pretty funny. I think most people would instinctively say “Yes”, but then after a few trips to the TV support would fall.

    RR

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  6. By rrapier on August 4, 2010 at 8:45 pm

    Kit P said:

    You should be happy that oil

    does not cause cancer.


     

    Not sure if you are being facetious, but there are plenty of carcinogens in oil. Benzene is probably the most well-known.

    RR

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  7. By rrapier on August 4, 2010 at 8:52 pm

    jcsr said:

    The plugging of this terrible well is a great relief to many of us, however there is still a controversy over the toxicity of the dispersant used and the damage it may have caused.

    I am looking forward to an explanation from you as a Chemical Engineer about this subject. Thank you for any light you can shed.


     

    I don’t know enough about the composition of the Corexit dispersant used to be able to comment much on it. My understanding is that it contains a number of organic compounds, petroleum distillates, and detergents — but I don’t know about the toxicity details on them. It is hard to say based on the limited information that has been released about the long-term impacts of the use of the dispersant.

    I know that a number of people have raised concerns, but I am not sure if those concerns are primarly because a lot of the details are murky, or whether there have been specific issues identified.

    RR

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  8. By ROBERT on August 4, 2010 at 9:40 pm

    If Mexico sues the United states can’t we just claim sovereign immunity?

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  9. By Kit P on August 4, 2010 at 11:16 pm

    “Not sure if you are being
    facetious,”

     

    I was! I suppose there is
    enough fear mongering to go around. For a little while I thought
    renewable energy would be immune then I got the what about dioxin
    question.

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  10. By Anonymous One on August 5, 2010 at 5:04 am

    W.S.,
    By current estimates, this is not the “biggest oil spill in history”, but now it is the second biggest. More oil was spilled into the environment than the Ixtoc spill of 1979.

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  11. By Jim Takchess on August 5, 2010 at 6:54 am

    Re: would interested in reading the RCA to see if there are new lessons to be learned or just a failure to learn the lessons of the past.

    Excellent point Kip. I bet it’s the failure to learn lessons of the past.

    Is it a matter of Engineering or a matter of subcontractors not standing up to a bullying general contractor asking them to cut corners to come in within budget and on time ? Will it be engineering or people ?

    It will be interesting to see. It reminded me of Katrina where Mayor D spent days talking to lawyers to see the monetary ramifications of evacuating the city where earlier action was warranted.

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  12. By Craig M on August 5, 2010 at 1:39 pm

    Methane is NOT toxic (http://en.wikipedia.org/wiki/Methane ) but it is an asphyxiant. I hope the rest of your post is better researched.

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  13. By Walter Sobchak on August 5, 2010 at 1:49 pm

    “The backlash against offshore drilling will have real implications with respect to slowing and killing drilling projects as stricter regulations are implemented.
    “Some promising areas will never be developed because the risks will be deemed to be too high.
    “The decline curve for global oil production will almost certainly be steeper as a result of this incident.”

    Ten years ago you might have been correct about these conclusions. But, the American economy is far too fragile (broke would be the one word description) and oil is far too expensive. We will wind up drilling in the Gulf and in other offshore areas within the next decade.

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  14. By rrapier on August 5, 2010 at 1:56 pm

    Methane is NOT toxic (http://en.wikipedia.org/wiki/Methane ) but it is an asphyxiant. I hope the rest of your post is better researched.

    LOL @Craig. You clearly didn’t read it then. I specifically pointed that out. But Simmons claimed 1). If you breathe methane, you die; 2). That methane is more toxic than hydrogen sulfide. There was no way enough methane was going to come out of the gulf and asphyxiate millions of people. His claims were nonsense, as is your insinuation above. Go read the post (i.e., do better research) before you mouth off about my research.

    RR

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  15. By rrapier on August 5, 2010 at 1:59 pm

    We will wind up drilling in the Gulf and in other offshore areas within the next decade.

    Oh, I think we will too. But the delays will increase the slope of the decline curve. And California and Florida will dig in until oil prices are very high.

    RR

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  16. By Robin on August 5, 2010 at 5:12 pm

    I wonder if the apparent “disappearance” of most of the oil that hadn’t hit the shore will negate the initial negative impacts the spill had on off-shore drilling expansion. Americans’ short term memory, combined with a general lack of scientific and environmental understanding might cause people to believe that everything turned out fine after all. Add in the effect of rising gas prices, and I think we will quickly return to a drilling culture, even for Gulf residents.

    Regarding the new spill response mechanism; if I recall correctly, the Exxon Valdez spill was what prompted Aleyska to institute the spill response and escort policies in place for Prince William Sound. So it does not seem unreasonable to think that it would take a spill in the Gulf for southern oil companies to enact a similar mechanism. As RR pointed out, risk mitigation is not often evident until a disaster strikes.

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  17. By armchair261 on August 6, 2010 at 3:17 am

    If anything, many of us have learned that there are 30,000+ capped oil well drillholes in the Gulf and that there are 4,000+ offshore platforms operating there. This is rather eye opening data…

    If a well is “capped,” it’s most likely because either a) it was a dry hole, or b) it’s production has declined to the point of being unable to flow at commercial rates. You may have the idea that these are capped wells as in Macondo: under very high pressure, full of oil and just waiting to blow. I think it’s better to consider them as played out, or just dry holes, without much reservoir energy or pollution risk

    The number of wells drilled in the Gulf is a matter of public record.

    Some interesting statistics that I have never seen published anywhere in the popular media… interesting in the sense that these figures seem very relevant in the context of discussions on industry recklessness and therefore relevant to policy making. Mostly sourced from Reuters (but some are my estimates based on EIA data): http://www.alertnet.org/thenew…..128424.htm

    First offshore well in the Gulf of Mexico: 1947
    Wells drilled in the US Gulf prior to the BP spill: 52,000
    Deep water (>1000 ft) wells successfully drilled in the Gulf: 4,000
    Major spills in the US Gulf prior to BP: 0
    Oil produced in the US waters, 1971 through end 2009: 14,000,000,000 barrels
    Oil spilled by blowouts in US waters, 1971-2009: 1,800 barrels.
    Failure rate (spill/production): 0.000012%
    Last significant US blowout: 1969

    If the claim is put forward that the American oil industry is reckless, how do you explain these figures? If you are going to measure this recklessness, how do other industries compare?

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  18. By Kit P on August 6, 2010 at 1:24 pm

    I am not seeing evidence of an improving safety culture at BP.

     

    http://en.wikipedia.org/wiki/T….._explosion

     

    “On March 23, 2005, a fire and explosion occurred at BP’s Texas City Refinery in Texas City, Texas, killing 15 workers and injuring more than 170 others.”

     

    It would appear that BP will use the same corrective action that did not work before, retire the CEO.

     

    The electricity generating industry has a very good safety record but the following illustrates what happens when standard practices are ignored. 

     

    Kleen Energy companies fined $16.6mn for deadly explosion

    http://www.pennenergy.com/inde…..fines.html

     

    “The U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) fined three construction companies and 14 site contractors a total of $16.6 million following an investigation into the causes of the February 7 fatal explosion at the 620 MW Kleen Energy natural gas-fired power plant in Connecticut. Six workers died and 50 others were injured.”

     

    I agree with armchair that there is ample evidence that energy can be produced safely.  We should only punish the reckless and not those with good safety programs.  

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  19. By Optimist on August 6, 2010 at 3:14 pm

    The backlash against offshore drilling will have real implications with respect to slowing and killing drilling projects as stricter regulations are implemented.

    I don’t know, RR. It seems the “Keep drilling” crowd is pretty excited, even now. In part, of course, due to the lovely state of the US economy. Time will tell who has the popular support.

    Gulf Coast residents were terrorized by some of the far-fetched claims, and the media was complicit by continuing to bring people like Simmons on because they could count on him to say jaw-dropping things. But that is irresponsible journalism.

    There is a reason why the traditional media is having such a hard time surviving, and you just nailed it. May this mark the end of breathless, “what you don’t know can kill you” reporting. Somehow I doubt it.

    But the delays will increase the slope of the decline curve. And California and Florida will dig in until oil prices are very high.

    Gotta love the free market. CA & FL wait extending oil supplies. Prices go up, leading to conservation. Everybody wins! Happy ending! What am I missing?

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  20. By OD on August 6, 2010 at 5:08 pm

    Oh Robert, don’t title your articles like that! I thought you had gone hard core doomer, and my anxiety level shot up to 12.

    Although the leak itself was horrific, it seems we have a better grasp on how to cap these wells then before the leak. We did not have to wait until the relief wells to be completed, as was the case in 1979. I think if anything this puts offshore drilling in a better light.

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  21. By OD on August 6, 2010 at 5:17 pm

    Gotta love the free market. CA & FL wait extending oil supplies.
    Prices go up, leading to conservation. Everybody wins! Happy ending!
    What am I missing?

     

    Roaming zombie hordes, parents eating their young, etc Laugh

    I mostly agree, but I would say a price that would be ‘painful’ for most in rich countries will be absolutely deadly to those in the 3rd world. To those countries, peak oil will definitely lead to a dieoff, imo. We already had rice farmers guarding their fields with guns during the last run up. What happens when oil goes to $150 and stays there?

    This is where I agree very much with Greer’s beliefs. In the medium term, peak oil to the 1st world will be economic, until the system can no longer opperate at all. How long that is, is anyones guess.

     

     

     

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  22. By Benny BND Cole on August 6, 2010 at 7:19 pm

    OT, but this paragraph in an LA Times story today just floored me. I had seen the numbers before, but this makes it seem like it is doable.

    “Iraq has signed 11 contracts with foreign oil companies to raise daily production capacity from 2.6 million to 12.5 million barrels in seven years. But the massive endeavor unfolds against the backdrop of a government in paralysis, with deep-seated feuds among leading parties, a proliferation of clandestine armed groups and a powder keg of resentments just looking for a spark.”

    12.5 mbd? Is that even physically possible in seven years? Even assuming a perfect government and, say, $85 oil?

    RR, do you know? Does anybody?

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  23. By OD on August 6, 2010 at 11:09 pm

    Benny,

    Stuart Staniford(sp?) had a great article about Iraq and their potential. It was on the oil drum or you can find it on his blog, earlywarning. Of course, much of that oil being produced depends on how stable Iraq is and can be. As of late, it looks like not very.

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  24. By armchair261 on August 7, 2010 at 2:01 am

    Benny,

    Having worked a few fields in the Middle East, and going through a few concession rounds, you really have to take these production forecast figures with a large grain of salt. Not only for the obvious problems of political stability, but also for the optimism of geologists and reservoir engineers bidding competitively for large national projects. The winner is also likely to have the most impressive numbers. But the earth might have different ideas. Always apply a healthy technical risk factor to such forecasts before deducting for politics and security.

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  25. By rrapier on August 7, 2010 at 1:28 pm

    Benny BND Cole said:

    12.5 mbd? Is that even physically possible in seven years? Even assuming a perfect government and, say, $85 oil?

    RR, do you know? Does anybody?


     

    Benny, as OD said Stuart wrote a pretty good article on Iraq:

    Iraq Could Delay Peak Oil by a Decade

    This was one of the things that shifted Stuart out of the imminent peak camp. Now I doubt 12.5 million bpd is possible, but I think they can clearly grow their production by quite a bit.

    RR

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  26. By Benny BND Cole on August 7, 2010 at 2:30 pm

    Yes, I was aware of the Stuart article, though he strikes me as more journalist than expert.
    I am just wondering as companies and geologists develop and get to know the ground better, are they finding this figure outlandish, doable, or even low?
    Does anybody have on-the-ground intel?
    Could the same story be told in Iran?

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  27. By PeteS on August 8, 2010 at 5:39 pm

    Personally I doubt that Iraq will grow to that level. After they more or less abandoned attempts to come to an internal political agreement on the distribution of oil revenues, they went out to tender for development of a number of fields in summer last year. Embarrassingly for the government there were only two bid for the fields on offer — the international oil companies reckoned that the risk premium was too low in an unstable country with potential lawsuits about the constitutionality of any contracts awarded. Then in December the Iraqi government played hardball and managed to flog a few more contracts, though not all of those on offer. There is still internecine fighting over oil  revenue distribution, and the oil unions are opposed to the involvement of iIOCs at all (as are a large proportion of the  Iraqi public).

    Iraq has probably a hundred years of production at current rates. I reckon there’s a good chance that internal trouble will prevent them from ramping up production enough to realise all their resource potential before the world is forced to turn its attention to other sources of energy. I reckon lots of Iraqi oil will never be exploited.

     (Just my hunch. P.S. Going from memory on the contract auctions, sorry if I have the dates wrong).

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  28. By Benny BND Cole on August 9, 2010 at 12:52 pm

    I read today in LA Times that many companies from India, Russia and China are going ahead, eshewing the boycott, and developing business relations with Iran. Especially in regards to fossil fuels. W/o any knowledge, I suspect Iran has opps like Iraq.

    Quite a commentary–who knows, maybe 20 mbd sitting on the shelf in Iran and Iraq. Can’t get it, not for geological reasons, but due to thug-state politics. But what if the situation improves in just those two nations?

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  29. By Optimist on August 9, 2010 at 7:02 pm

    I mostly agree, but I would say a price that would be ‘painful’ for most in rich countries will be absolutely deadly to those in the 3rd world. To those countries, peak oil will definitely lead to a dieoff, imo. We already had rice farmers guarding their fields with guns during the last run up. What happens when oil goes to $150 and stays there?

    The third world has its problems, quite independent of oil prices. It’s a bit of a Catch-22: low oil prices do limited good, high oil prices hurt really bad.

    But people can be quite innovative, especially when its your survival that’s at stake. Die-off won’t happen that easily.

    This is where I agree very much with Greer’s beliefs. In the medium term, peak oil to the 1st world will be economic, until the system can no longer opperate at all. How long that is, is anyones guess.

    I don’t see the point where “system can no longer opperate at all”, I just see us getting more inconvenienced, and paying more for stuff.

    Key assumption: the government stays out of the fight. As Mr. Nixon so kindly demonstrated, once Uncle Sam tries to “control” prices, anything can happen, including shortages. Once you have shortages, anything is possible…

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  30. By armchair261 on August 12, 2010 at 1:48 pm

    A comment on Iraqi production potential from Ibrahim al-Oloum, a former Iraqi oil minister, at the second Iraq Oil and Gas Summit in May 2009:

    http://www.forbes.com/2009/05/…..racts.html

    In 2007, Iraq produced 2.5 million barrels of oil per day. Today it is down to 2.2 million bpd. (Iraq’s oil exports peaked in 1980 at 3.5 million bpd, and dropped from 1.9 million bpd in 2008 to 1.8 million currently). The recent drop is due to declining output from megafields in the south. Al-Oloum says the goal is to boost Iraq’s output to 4 million bpd by the end of 2014, with a target capacity of 6 million to 7 million bpd by 2019.

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  31. By silvaneus on August 20, 2010 at 4:13 pm

    I fear we will never stop hearing “drill baby drill” The laws of economics are strongly against it every happening, until of course we run out. The demand for oil is far too high. There isn’t a Saudi oil well here to save us like in the 70′s, prices will keep climbing. Especially with China becoming a strong economy. The demand for oil is only increasing and therefore the supply must also increase, so we will keep hearing “drill baby drill”

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  32. By Kit P on August 20, 2010 at 5:44 pm

    Earth first, we can drill the other planets later.

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