Fears of oil depletion are 'exaggerated'
The oil market will remain under the influence of several external factors including investment, environment and a possible depletion of crude resources but such fears are exaggerated, according to a British Petroleum official.
Peter Davies, Chief Economist at BP, admitted that the world's oil potential is limited but dismissed what he described as theories about peak oil.
"Can we go on as before… are there external constraints in the oil market that would prevent the trends that we have known from continuing," he told a recent seminar organised by the Saudi Association for Energy Economics (Safe)
"One factor is resources. They are limited, and a barrel can only be produced once. But ideas of peak oil supply are not true. Doomsayers have exaggerated the issue. The bell-shaped curve of production over time does not apply to the world's oil resources," he told the seminar in Alkhobar city.
"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."
Davies cited growing global environmental concerns as another constraint in the oil market, referring to such topics at the Copenhagen summit.
"There is much known about climate change, but there is also much that is unknown. On the known side are the basic science of the greenhouse effect, consumption of fossil fuel leading to an increase in emissions and that if emissions continue to rise, global temperatures will rise," he said. "But what is not known are the details of climate changes. That is where a lot of genuine disagreements occur. In addition, we don't know what policies will be adopted around the world or what effect they'll have."
Davies referred to other major market factors such as energy security and what that means to different people, investment in production, rise in consumption, the perceived structural plateau of oil demand growth in developed economies, speculation in the market and oil's "symbiotic" relationship with the economy in the wake of the recent global economic crisis.
His remarks followed claims by many oil analysts and officials worldwide about the so-called peak oil, which means that proven crude reserves have reached their peak and are now beginning to decline.
But such scenarios have been refuted by most oil producers, mainly the Arab countries on the grounds their region actually contains much more oil, which could be extracted by advanced technology in the future.
According to the 10-nation Organisation of Arab Petroleum Exporting Countries (Oapec), which controls more than 60 per cent of the world's recoverable crude deposits, the total Arab oil resources in place could reach over 2,700 billion barrels, nearly four times their proven oil wealth of around 660 billion barrels.
"Assuming an extraction rate of 35 per cent, the Arab oil deposits in place could reach 2,738 billion barrels. This means the oil quantities that cannot be extracted by present technology are around 1,809 billion barrels, which are nearly 645 billion barrels above the world's proven oil resources. These quantities, if they can be extracted, will meet the world needs for 60 years. Even if only 10 per cent of them could be extracted, they could be enough for seven years," it said.
Its figures showed four major Gulf oil producers – UAE, Saudi Arabia, Kuwait and Iraq – controlled around 50 per cent of the world's recoverable crude potential and more than 86 per cent of the total Arab oil reserves.
But it said large quantities of oil and gas remained undiscovered or undeveloped in the region, totalling around 175 billion barrels of oil, 43,368 billion cubic metres of natural gas and 67 billion barrels of gas liquids. In the UAE, the undiscovered hydrocarbon reserves were put at around 7.7 billion barrels of crude oil, 1,261 billion cubic metres of natural gas and 2.4 billion of gas liquids.
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