Opinions of Oil Company Executives on Peak Oil

The views of the oil industry on Peak Oil are divided, ranging from a non-event to getting there fast. Here I try to give the opinions of oil company executives about Peak Oil and related issues. The list is certainly not complete. For example, I omitted opinions expressed by the executives after they are retired. After each quote I list the name of the executive, his position at the time and the link (where possible) to the original source. At the end of the article I make some remarks.

CHEVRON

For more than two years now Chevron took out a series of “easy oil is over” adverts and willyoujoinus campaign, which can be seen in nearly all the leading journals and newspapers. The adverts are signed "Dave" - David O'Reilly, the company's chairman.

Here are some of the lines from the adverts:

"Energy will be one of the defining issues of this century, and one thing is clear: the era of easy oil is over ... Many of the world's oil and gas fields are maturing. And new energy discoveries are mainly occurring in places where resources are difficult to extract - physically, technically, economically, and politically".

“The world is currently burning 2 barrels of oil for every barrel of new oil discovered.”

Below are the specific remarks made by Chevron executives:

“No matter what our position might be on the depletion debate, we all recognize that our industry is built on a finite resource of indispensable importance.” - Peter J. Robertson, Vice Chairman. 9 September 2003.

“Most of the debate about whether peak oil is imminent, however, misses the point. Oil will peak - that is a geologic fact. But the new energy equation is not static. It is dynamic and variable.” - David J. O'Reilly, Chairman and CEO. 21 September 2005.

“There's been plenty of debate about the notion of "peak oil." … I'm very much a believer in the plateau philosophy - a leveling off of oil supply over many years.” - George L. Kirkland, Executive Vice President for Upstream and Gas. 8 February 2006.

"People who think that peak oil will occur are just looking at conventional oil. You have to think beyond that…there's plenty of resources. The challenge is getting it converted economically into products that people can use." - David J. O'Reilly, Chairman and CEO. 13 June 2006.

"The question is will there be peak oil? Yes, but will it be the disaster [some people] expect? I don't think it has to be. We have other ways of making fuel." - Donald Paul, Vice President and Chief Technology Officer. 24 October 2007.

TOTAL

"Although expert opinion is divided on the issue, here at Total we put the watershed oil production peak at around 2020 and 2030" - Yves-Louis Darricarre, President Gas & Power. Total's Corporate Social Responsibility Report 2003.

“As for the much-discussed oil-production peak, some observers see it occurring by 2010 while others give us until 2040. I tend to think that oil production will peak by about 2020-2025, provided that we can limit growth in demand to about 1.5 million barrels per year. I think gas production will peak about fifteen years later than oil, probably around 2040.” - Thierry Desmarest, Chairman and CEO. Energies No 7. March 2005.

“If demand continues to grow at this pace, global production will peak sooner, not later, for geological reasons.” – Thierry Desmarest, Chairman and CEO. Total’s Corporate Social Responsibility Report 2005.

“The opinion of our geologists is we can go a bit beyond 100 million bpd, but not to 120 million,” - Thierry Desmarest, Chairman and CEO. 8 April 2006.

“The oil reserves are there, that is the good news, but what we can bring on today to meet demand is limited by factors other than what scientists see in a lab or think-tanks.” - Christophe de Margerie. Head of Exploration. 8 April 2006.

"The capacity of raising production is a real challenge ... if we stay with this type of production growth our impression is that peak production could be reached around 2020." - Thierry Desmarest, Chairman and CEO. 6 June 2006.

“As oil prices soar and peak oil approaches, coal remains a vital source of energy.” - Total’s Corporate Social Responsibility Report 2006.

“[P]eak oil does not spell the end of oil, but designates the production peak that will precede a gradual decline in output over several decades. Oil production could top out at around 100 to 110 million barrels a day by 2020-2030…...There is no panacea for satisfying growing demand. We’ll have to rely on a mix of complementary energies, each used in the application where it is most appropriate, while at the same time striving to eliminate the wasteful habits developed in the years of cheap, abundant energy.” - Jean-Michel Gires, Executive Vice President, Sustainable Development and the Environment. 11 May 2007.

“100m barrels per day is now in my view an optimistic case… It is not my view: it is the industry view, or the view of those who like to speak clearly, honestly, and not just try to please people….We have been, all of us, too optimistic about the geology. Not in terms of reserves, but in terms of how to develop those reserves: how much time it takes, how much realistically do you need.” - Christophe de Margerie, CEO. 30-31 October 2007.

ENI

“Not this year, nor the next, but maybe as soon as five years hence, oil prices will start to rise. Well before 2010, the world will be vulnerable to 1970s-style oil shocks….despite today's low prices, in the long term we will be back to a high-price scenario in the oil sector.…output [in the North Sea] will start to decline in the next 2 to 3 years….My forecast is that between 2000 and 2005 the world will be reaching peak production from our known fields, and after that, output will decline." - Franco Barnabé, CEO. 15 June 1998.

“None of us must mislead the public by claiming to hold an objective truth in our hands. One may fear the exhaustion of oil, but one cannot claim to possess a scuientific instrument to predict it, as the advocates of oil exhaustion do.” - Leonardo Maugeri, Senior Vice President for Corporate Strategies and Planning. 2006.[1]

“There is an alarmist theory that the world is running out of oil. Quite the contrary. There is plenty of oil in the ground, and high prices are just what's needed to tap the earth's vast reserves.” - Leonardo Maugeri, Senior Vice President for Corporate Strategies and Planning. 24 July 2006.

“It's so seductive, in a way, to speak of a coming catastrophe—but we're not on the brink of a catastrophe…. No one knows how much oil there is. But all the hints we have—for example surveys made the U.S. Geological Survey—indicate that the world still has really huge oil resources in its soil.” - Leonardo Maugeri, Senior Vice President for Corporate Strategies and Planning. 14 February 2007.

EXXON

In March 2006, ExxonMobil ran a peak oil advertisement in prominent newspapers. ExxonMobil ad says “Contrary to the theory, oil production shows no sign of a peak…A peak will not occur this year, next year or for decades to come…With abundant oil resources still available peak production is nowhere in sight.”

“We have been very successful in the oil industry for a very long time so we in the industry know that the world is not in danger of running out of oil any time soon. We hear all sorts of so-called experts predicting the end of the world's oil supplies. Or the end of what they call the era of easy oil. There has never been an era of “easy oil” – our industry has constantly operated at the technological frontier. Oil only seems easy after it has been discovered, developed and produced. These peak-oil predictions are not new. They have been occurring, particularly at times of high prices, regularly since the 1920s.” – Mark Nolan, Chairman. ExxonMobil Australia. 11 September 2006.

“With all due respect to many who have said otherwise, the era of “easy oil” is not over. Why? Because there never has been an era of “easy oil.” - Rex W. Tillerson, Chairman and CEO, Exxon Mobil Corporation. 13 September 2006.

"I think there's a lot of misconceptions of what peak oil is….The resource base is continually changing, driven by economics and technology." - Lee Raymond, former CEO of ExxonMobil Corporation. 14 September 2006.

Some worry that we will soon reach “peak oil,” or the point after which worldwide oil production begins to decline. Oil, like all fossil fuels, is indeed finite, but it is far from finished…. the real question is not whether we will soon reach peak oil, but whether we can reach peak performance in the responsible production and use of oil and other fossil fuels….. some today claim that the “era of easy oil” is over. It is true that today oil is not “easy” — but, over my 32 years, it has never been easy. Changing conditions, growing demand and evolving environmental expectations test our latest technology and require our industry to continuously innovate further. Oil only seems easy after it has been discovered, developed and delivered.” – Rex W. Tillerson, Chairman and COE. ExxonMobil Corporation. 30 November 2006.

“Ongoing technological advances have enabled the continued expansion of economically recoverable supplies from resources once considered technically challenging to what we now describe as the “easy oil.” – Rex W. Tillerson, Chairman and COE. ExxonMobil Corporation. 13 February 2007.

SHELL

On July 10, 1985 the President of Shell USA John Bookout gave a speech in San Antonio on “two centuries of fossil fuel energy,” which was later on published in 1989.[2] In his talk he showed a chart showing oil and gas peaking about 2010 and 2015 respectively and declining thereafter.

“[Referring to the Shell Scenarios] Oil supplies seem likely to peak around 2025, and may have fallen considerably below current levels by 2050.” - Mark Moody-Stuart, Chairman of Shell Transport and Trading and a Managing Director of the Royal Dutch/Shell Group. 4 February 1998.

“Recently, there has been theories emerging in the world, that highlight the finiteness of petroleum, such as the Peak Oil theory and ones questioning how much longer petroleum will be combusted considering its environmental impacts. …We had better assume that times of cheap oil might have come to an end.” - Haruyuki Niimi, Chairman and CEO, Showa Shell Japan. 24 January 2006.

“On top of concerns about high oil prices now comes the fear that we have reached “peak oil” and that global oil output will start to decline. Have we? If oil has peaked, do we face a future of growing energy shortages, rising prices and international conflict for supplies? No one should underestimate the energy challenge….. My view is that “easy” oil has probably passed its peak. But there are other reserves that are still a long way from their peak. In unconventional oil and gas – resources that are harder to tap – there are plenty of reserves. The oil industry has to explore new frontiers, develop new hydrocarbon energy sources and integrate “CO2 solutions.” - Jeroen Van der Veer, CEO Royal Dutch Shell. 25 January 2006.

“The growth rate of supplies of “easy oil”, conventional oil and natural gas that are relatively easy to extract, will struggle to keep up with accelerating demand. Just when energy demand is surging, many of the world’s conventional oilfields are going into decline. The problem is not the availability of resources as such…..For every barrel of oil or cubic meter of gas that you consume today, to replace that barrel it costs more, so our industry gets a lot more capital intensive per unit all the time." - Jeroen van der Veer, CEO, Royal Dutch Shell. 25 June 2007.

“When it comes to oil and gas many people ask, Are we running out of oil and gas? The answer is, No. To the peak oil theorists, I would say I agree in part with what peak oil theorists suggest because we are probably past peak oil when it comes to what is defined as easy, conventional oil and gas…..There are very few opportunities to find easy, available oil and gas by conventional means of production. And so we’re going into more expensive, somewhat more costly, somewhat more risky areas …So to the peak oil theorists, I would say that conventional easy oil is peaked but there’s plenty of oil and gas yet to be had and the technology is developing or is already here to make it possible to bring oil sands to market, later to bring oil shale to market through technology...” - John D. Hofmeister, President of Shell Oil America. 31 July 2007.

“In a way [Peak Oil] scarcely matters; what really matters is the gap between gap in production and demand. I don’t know whether there is going to be a peak in world oil production, whether it’s going to plateau and then slowly come down. It could well plateau within next 20 years and I guess I would be surprised if it hadn’t. The thing is that demand is almost certainly going to outstrip availability, for whatever reason, and that is what is going to cause us difficulties. We’re never going to run out of oil, it’s simply going to become too expensive to use as we traditionally have. And that may happen much sooner than we expect.” - Ernest Ronald Oxburgh, former Chairman of Shell Transport and Trading Company. 16 September 2007.

“At Shell, we see the energy challenge as a set of hard truths. The first hard truth is the acceleration of global energy demand. By 2050, the world could be using double or more the amount of energy we use today. The main reasons are population growth and fast economic development in Asia. The second hard truth is that we cannot rely on “easy oil” supplies to meet that demand. By “easy oil” I mean oil and gas that are relatively easy to extract.” - Jeroen Van der Veer, CEO, Royal Dutch Shell. 18 October 2007.

“Peak oil (the theory that oil production worldwide is in an irreversible decline) is still an open question. The National Petroleum Council recently said we are a long way from peaking. You need to look at the assumptions. Easy oil production has peaked.” – John D. Hofmeister, President of Shell Oil America. 7 November 2007.

BP

“The world isn’t running out of oil….There is no physical shortage of oil or gas. There are decades of booked reserves of both oil and natural gas and even more yet to be found. And there are huge volumes of heavy oil – in Canada and Venezuela – which are identified and which have yet to be developed…. we can bring that oil to market at a reasonable cost – a cost well below the current market price.” - Lord Browne, BP Group Chief Executive. 29 September 2005.

“Some in the ‘peak oil’ school of thought believe that we are in a crisis and the age of oil is ending soon. I am actually not a resource “peakist”. The BP Statistical Review indicates that the world’s proved reserves of oil & gas continue to grow, from around 1.2 trillion barrels of oil equivalent in 1980 to over 2.3 trillion barrels of oil equivalent today. During this time the reserves to production ratio has stayed flat, in the face of increasing demand, at around 50 years of production. However, whilst I am not a resource “peakist”, I am a capacity “peakist”, because I believe the fundamental constraint on the industry’s ability to grow is the capacity, both human and equipment, to connect these resources to production.” – Ellis Armstrong, Group Vice President, Exploration & Production. 24 October 2006.

“But as well as taking clear actions in the short and medium term, we should prepare for the day when production will go into decline. The precise timing of what people call Peak Oil will really be governed by the actions that all parties, producers, consumers and the industry, choose to take over the coming years.” - Tony Hayward,[3] Group Chief Executive. BP. 11 June 2007.

“I believe, from what I know today, that peak oil supply is still a long way off. However, we may face a peak demand for oil first….However, the limitation to oil supplies that I do see is one caused by politics….Production potential in the range 95-105 million barrels a day is achievable, and sustainable for sometime, on the back of reserves growth, exploration and unconventional oil development. Add to this the possibility of biofuels, gas to liquids and coal to liquids as additional sources of liquid hydrocarbons and the peak oil argument looks even more misplaced, or at least premature.” – Michael C. Daly, Group Vice President, Exploration & LTR. 10 September 2007.

Other oil companies

“We’ve embarked on the beginning of the Last Days of the Age of Oil. Nations of the world that are striving to modernize will make choices different from the ones we have made.” — Mike Bowlin, Chairman and CEO, ARCO, and Chairman, American Petroleum Institute. 9 February 1999.

"[The] history of cheap oil may have ended." - Rafael Ramirez, President. PDVSA. 24 May 2004.

"I don't think there is going to be any new Middle East or Saudis hanging around. There aren't many unexplored basins…..If you find 50 million barrels in a US$10 a barrel world, it's the same as a 10 million barrel discovery in a US$50 world." - Jim Buckee, CEO. Talisman. 12 October 2004.

“The era of oil is coming to an end. The world is thirsty for more energy and the demand for gas is growing steadily” - Helge Lund, President and CEO. Statoil. 24-26 April 2005.

"[T]he world has only consumed about 18 percent of its conventional and non-conventional producible potential [of 5.7 trillion barrels of oil], even leaving aside oil shale potential. That fact alone should discredit the argument that peak oil is imminent, and put our minds at ease concerning future petroleum supplies." - Abdallah S. Jum‘ah, President and CEO, Saudi Aramco. 12 September 2006.

“The world petroleum industry has about 150-years development history, and it is increasingly difficult for us to find new and giant oilfields. Today, around 70% of world oil production comes from those mature oilfields which have been producing for over 30 years. In this context, how to improve the recovery of mature oilfields becomes a major issue for the industry.” - Xu Wenrong, Assistant President, CNPC. 13 February 2007.

“[T]he peak for conventional oil and gas sources may be on the horizon, but significant advancements have been made in technology and that alternative energy sources now are being pursued more aggressively. Over time economics will allow us to move further in to a new era of energy that goes well beyond traditional oil and gas.” - Gene Batchelder, Senior Vice President, Services and CIO. ConocoPhillips. from Columbia Community Report on “Conversation on Energy”. 24 October 2007.

"There is a real problem -- that supply may not be possible to increase beyond a certain level, say around 100 million barrels….The reason is, in some countries production is going down and we are not discovering any more of those huge oil wells that we used to discover in the Sixties or the Fifties….So many people are talking about the peak oil theory…. It is not the figure itself but the principle that the world cannot continue being able to produce oil infinitely." - Shokri Ghanem, Chairman, Libyan National Oil Corporation. 30 October 2007.

"I believe we're already here (at the peak)…I think it’s fair to say the era of cheap energy is over" - James W. Buckee, President and CEO. Talisman Energy Inc. 9 May 2007.

“Underpinning the long-term price of oil is the fact that the world is consuming over 30 billion barrels a year and replacing only a fraction of this with new discoveries. In the long term, I see the need for significantly higher prices to moderate demand and bring new supplies onstream.” - James W. Buckee, President and CEO. Talisman Energy Inc. 13 March 2007.

“I have always been a big believer in the oil price going higher. I should have pursued acquisitions more aggressively than I did, because the supply situation is proving just as tight as I thought it would be….. we’re there or close to [peak]. Mexico, the North Sea and possibly Ghawar are all in decline. The truth is the world is producing 30 billion-plus barrels of oil a year and is finding less than 10 billion. This is the worry.” - James W. Buckee, former[4] President and CEO. Talisman Energy Inc. 8 October 2007.

A chart in Talisman Energy’s November 2007 Corporate Presentation Handout shows the growing gap between oil discoveries and production with a peak around 2010.[5]

REMARKS

US Army General Mitchell Zais wrote in March-April 2007 issue of Military Review that: “our flawed strategy in Iraq has produced the situation we now face. This strategy is a product of the Pentagon, not the White House…..From the very beginning, Defense Department officials failed to appreciate what it would take to win this war….The last thing you want is a uniformed military accustomed to debating in public the orders of their appointed civilian masters. But retired generals and admirals are starting to speak out, to criticize the strategy that has produced our current situation in Iraq.”

His thoughts could well be applied to oil companies executives and Peak Oil. Masters of oil companies are shareholders or governments, depending on whether the company is private or national. Senior officials of those companies may or may not understand perfectly what Peak Oil means. Many interpret Peak Oil as running out of oil. But some understand perfectly what Peak Oil really means and what its possible implications for the industry would be. In this case they either believe that technology and investments will save them in the future, hence are optimist, or they believe that things will get tough, hence realist. Very few senior officials would have the courage to tell openly that we may face a big program.

M. King Hubbert had that courage. He presented his paper in 1956 while he was still a Shell official. Today, some senior oil company executives are showing the similar courage. Instead of parroting what famous institutions say, they tell what they really think. Christophe de Margerie of TOTAL is the best example.

Many retired oil company senior officials believe that Peak Oil is not avoidable and it will bite us sometime in the next decade. Their experience in and knowledge of the oil industry and geology is extremely valuable. However, their thoughts after retirement do not have the same effect on public. Because, people generally tend to give more attention to the current position holder and unfortunately not much to the retired ones. But if the thoughts of the retired ones are supported by more and more currently employed senior executives, layman will understand better what they should expect from oil in the future, and be prepared.

footnotes:
[1] In Chapter 16 of his book “The Age of Oil: The Mythology, History, and Future of the World’s Most Controversial Resource. Praeger Publishers. 2006.
[2] J.F. Bookout. Two Centuries of Fossil Fuel Energy, Episodes, 12/4, pp 257-262, 1989.
[3] He succeeded Lord Browne as group chief executive in May 2007.
[4] John A. Manzoni replaced Buckee as President and Chief Executive Officer of Talisman Energy Inc. on September 1, 2007.
[5] Talisman gives Campbell as source.

Tag: Peak Oil