The good news
Recently the oil world received some good news in the form of a very substantial discovery in the deep waters off Brazil. In water-depth of 2000 meters, under 3000 meters of sand and rock and 2000 meters of salt, a major discovery was made, expected to hold 7-8 billion barrels of oil, for starters. This is very good news for Brazil and it caused quite some euphoria, even up to the possibility of Brazil becoming an “oil super-power” and the announcement of the end of the peak oil discussion.
Especially the latter seems somewhat premature, although to a certain extent there may be a point in it.
There is still a lot of oil to be found apparently. The Arctic, East Siberia and the very deep seas are just a few of
the places that may still contain very substantial amounts of oil. But as the first well in the Brazilian sub-salt
discovery took 2 years and $ 150 mm to drill, and the second still six months and $ 60 mm, it will take a
considerable amount of time before the expected and anticipated 1 million barrels per day will flow.
A vast infrastructure will be needed, several very big production platforms able to operate under such circumstances,
much steel and many man-hours are just a few of the requirements; all in short supply. It may take another 10 years
or more before a stable and substantial flow of oil can be expected from this discovery. And the story is quite
similar for the Arctic and other frontier-areas.
The global oil market seems well-provided for at the moment, whilst speculation is rampant and is actually determining the price. The reserve production capacity is quite thin and the expected increase in demand, mainly from Asia, the Middle East and the Americas may outrun the increase in supply in the coming years.
The problems we face in the market have less to do with the expected amount of oil that may still be found, but much more with the depletion-factor in combination with increased demand that will cause a shortage of supply at a certain moment in the coming years.
Many projects, especially the big ones, announce delays and cost-overruns.
Planned projects will be subject to the excessive rise in steel prices, greater complexity and an ever more acute
shortage in skilled workforce (and the subsequent rise in costs as a result).
So whilst it is still good news for Brazil to have found such a substantial amount of oil within its sovereignty, it may still be a bit early to see this as an end to the supply problems in the world.
Alexander
A response is always welcome at alexander@gas-oil-power.com
