Peter Davies, former head economist at BP, says fears about peak oil production are “overstated and exaggerated.” (image: telegraph.co.uk)

An article in Emirates Business 24/7 this week announced new studies and figures aimed at proving that claims about peak oil are “exaggerated.” This latest round in the high-stakes game between oil producers and climate-change whistleblowers, however, isn’t exactly from the most neutral of sources. The primary claim reported was made by Peter Davies, a former chief economist for BP, while delivering a speech during a recent seminar held by the Saudi Association for Energy Economics (SAFE)–the article notably omits that Davies is no longer in BP’s employ. While paying lip service to the fact that global oil resources are, in fact, finite, Davies countered “theories” about peak oil by saying generally that technology and economics will find a way to stretch our oil resources much farther into the future than predicted:

Those who believe in peak oil tend to believe that technology and economics don’t matter, and I think this is false. The application of technology, the innovation of new technology and economic forces especially mean that recoverable oil resources can increase. If there is a peak in oil, it will come from the demand side. There are always fears, but these remain overstated and exaggerated.

BP’s estimates of word oil reserves (broken down by region) at the end of 2008. (image: bp.com)

This of course, would be a balm to the anxieties of any oil-producing nation, and the article goes on to cite statistics from the Organization of Arab Petroleum Exporting Countries (OAPEC),which appear to back up Davies’ statement. According to OAPEC, there are some 1,809 billion barrels of oil in the Gulf region beyond proved reserves, which cannot be extracted using current technology but which could be potentially tapped in the future. The article claims: “These quantities, if they can be extracted, will meet the world needs for 60 years.” But that is a rather large “if.” The figure falls as low as “enough oil for seven years” if only 10% of the deposits are usable and obtainable.

As we’ve reported previously, Colin Campbell, a former BP geologist and founder of Association for the Study of Peak Oil and Gas, has stated that peak oil occurred in 2008, and that numbers like OAPEC’s are based on poor reporting practices for oil reserves. It is apparently common in the industry for oil companies to report the minimum of reserves upon the discovery of a field, and then revise the public estimates upward during the course of its life, so that the true reserve numbers are based on research done at the outset and don’t reflect newly discovered oil. In addition, he believes that “conventional” reserves peaked in 2005, and that since that time, the shortfall between demand and what the world’s oil fields could put out has been met by oil from more expensive and difficult to extract locations such as the Canadian tar sands. By Campbell’s logic, we are already tapping the sort of resources that the Gulf is counting on for its future productivity, and that shift was largely responsible for the oil price spikes we saw in the winter of last year. Another peak-oil believer, Swedish physicist Kjell Aleklett, claims that overestimation of Gulf reserves by the International Energy Agency may be partially responsible for the current financial crisis in Dubai. The Emirates city-state is surprisingly poor in oil resources, and dependent on petro-fueled tourism from its wealthier neighbors and other parts of the world. So, if Akelett and Campbell are correct, Dubai’s problems may be a harbinger of things to come – a canary in the oil field, if you will – if petroleum energy use doesn’t shift in a more sustainable direction.

Outspoken physicist Kjell Aleklett. (image: energyvision.org)

In a piece on his personal blog posted Tuesday, Swedish physicist Kjell Aleklett posits that peak oil, as well as faulty predictions by the IEA, led to the current debt crisis in Dubai. Although part of the United Arab Emirates, an oil-rich member of OPEC, Dubai itself is oil-poor, and thus relies on other sources of income like tourism and real estate. As the global recession hit these areas hard, Dubai found itself in financial hot water.

Aleklett connects peak oil to Dubai’s current situation in two ways. First, Dubai is a city-state that is heavily dependent on tourist travel, and its many attractions are meant to be enjoyed by people who would travel to Dubai by air. In light of peak oil, a phenomenon Aleklett wholeheartedly believes in, aviation will not be able to expand in the future, and thus Dubai’s economy is in serious trouble.

Secondly, Aleklett points out that huge investments in Dubai’s infrastructure were made based on predictions issued by the International Energy Agency. In their World Energy Outlook five years ago, they foresaw oil production in 2030 to be over 120 million barrels per day, while the outlook in Aleklett’s new report “The Peak of the Oil Age” is closer to 75 million bpd. And though Dubai is certainly the first to have made a mistaken investment based on the IEA’s overly optimistic outlook, they most likely won’t be the last.

This post comes just a few weeks after Aleklett blasted the IEA for downplaying the scale of future oil shortages. He contended that IEA supply figures have become highly politicized, and their predictions of oil consumption in the coming years are unrealistic. The main reason for the disagreement seems to stem from the alleged productivity of new oil fields. The IEA contends such fields will more than fill the supply gap, while Aleklett believes that the oil contained therein is too costly and difficult to get to, making it worth little.

If Aleklett is correct in his assessment, Dubai will likely not be the last nation to find itself basing investments on faulty data and finding itself in trouble. Furthermore, if his future oil supply predictions are correct, we’re in for a bumpy ride. With 10 million barrels per day less than that what we’re producing now, oil prices would soar as would the prices of associated products like heating oil, and the economy would have a hard time once again.

Professor Kjell Aleklett. (image: wikipedia.org and aspo-australia.org.au)

A physicist at Sweden’s Uppsala University is taking issue with last week’s assessment of future oil supplies by the International Energy Agency (IEA), reports the Guardian.

Physics professor Kjell Aleklett at Uppsala University, one of Europe’s leading academic institutions, published a scathing review of the IEA’s annual World Energy Outlook, saying that the organization has drastically downplayed the scale of future oil shortages. He contends that the IEA’s oil supply figures have become “politicitized” and urges European governments to review global oil supplies themselves.

In its World Energy Outlook annual report, the IEA last week predicted lower oil prices due to carbon-reduction efforts. The timing of the IEA report was designed to spur leaders to come to an agreement in Copenhagen next month. Aleklett, the co-author of a new report, “The Peak of the Oil Age,” says oil production will be closer to 75m barrels a day by 2030 than the “unrealistic” 105m the IEA predicted in its report. Aleklett, who also runs a Global Energy group at Uppsala, described the IEA’s report as a “political document,” designed for consuming countries with a vested interest in low prices.

This accusation by Aleklett is the second time in a week that the IEA has come under fire for an unrealistically rosy forecast: last Thursday, a whistleblower at the agency expressed similar doubts about the way energy statistics were being collected, and added that the U.S. has been encouraging the overly-optimistic reporting to avoid a global oil panic and resulting oil grab. Other IEA insiders also suspect U.S. influence and fears of a stock market panic helped to prompt the Paris-based organization’s figures.

When the whistleblower story appeared, Aleklett said that he had similar worries about the IEA. He says that when the Organization of Economic Cooperation and Development, the 28-country council that counts on IEA as their energy advisor, gave him the task of writing a 2007 report, ‘Peak Oil and the Evolving Strategies of Oil Importing and Exporting Countries,’ it was one of a number of reports that were discussed at a round-table meeting held at the IEA. At that time, says Aleklett, he had several private conversations with IEA officials, who reported the revelations that were now being reported in the Guardian, under the promise that he not name them as sources. He said he heard the same allegations earlier from a Norwegian IEA officer, who maintained that the U.S. was pressuring the agency.

According to the Canadian Globe and Mail, Aleklett and the IEA are in agreement on the estimated oil volume in the fields yet to be discovered and developed. They sharply disagree on the productivity of these new fields, with the IEA contending that these fields will more than fill the supply gap, as the old fields are no longer usable. Alekett points to history, which has shown that the new fields, which are generally smaller, are less productive than old ones and points to the dramatic production rates from the North Sea fields, which reached their peak output in 2000, as an example. He cites the slow-to-nonexistent development of these new fields, and says that the not-yet-developed reserves in the IEA report cover 1,874 fields of various sizes that would all have to come into production in the next 20 years.

“That is something like eight fields per month coming on stream,” Alekett’s report reads. “Even if the oil exists, it is questionable whether the necessary investment needed to produce such a rapid pace of development can be achieved in timely fashion.”

A tar sands mine. (image: ran.org)

The paper also focuses particular concern upon future production rates from “unconventional” sources, such as tar sands, saying that there is a lack of information in the 2008 Outlook figures which has been repeated in the 2009 Outlook report, and adding that “we must therefore regard the IEA production figure as somewhat dubious until it is explained more fully.”

For its part, IEA has called the accusation that politics are influencing its predictions “groundless,” and that the Outlook report was reviewed by 200 independent experts. A spokeswoman from the agency said, “We would be happy to see any initiative to improve the data quality on reserves and decline rates. We believe our World Energy Outlook 2008 opened an important door to have more field data and transparency and would very much welcome similar efforts to help improve transparency in the oil sector.”

The IEA was established in 1974 after the oil crisis in an attempt to safeguard energy supplies to the West. The World Energy Outlook is produced annually under the control of the IEA’s chief economist, Fatih Birol, who has defended the projections from other outside attacks. Birol has been facing tough questions about the figures from inside the agency, say IEA sources.

Alekett’s own predictions of the global oil supply are stunning: Production in 2030 will be about 76 million barrels a day, or about one-third less than the IEA’s figure, and some 10 million less than current production. If, as seems likely, Alekett’s report and the IEA whistleblower’s allegations are correct, the coming scenario is not pretty. If oil supplies decline, prices would dramatically rise, which of course, would be passed on to consumers in the form of higher prices for fuel, diesel and heating oil, food, and pretty much everything else.