Democracy and Peak Oil in Kuwait
By EV World
This week's trans-Atlantic dialog between EV World's editor in chief and Doug Low, the editor of the Oil Depletion Analysis Center newsletter focused initially on Chevron's announcement that it has discovered a large oil field 175 miles out into the Gulf of Mexico. Some reports estimate the size of the field, which is some 28,000 feet below the surface, in 4,000 feet of water, between 3 and 29 billion barrels, but according to Low, Chevron places their own estimate in the 300 million barrel range, significantly less than the numbers cited in more optimistic projections.
On the European side of the Atlantic, there is talk of similar large deposits in the Barents Sea north of Scandinavia and the Russian Arctic coastline. However, according to Low, a oil industry professional told him that the consensus is that after having surveyed the Barents basin extensively in the past is that there is very little oil there.
Meanwhile, this past week, oil prices dropped below $70 a barrel and may eventually drop into the $50 range. A number of factors have converged to make this possible including a subsidence in political tensions in various world hot stops, however temporary. Also, the end of the U.S. summer vacation driving season has passed and there is sufficient oil in storage to carry into the autumn. However, Low cautioned that the U.S. is still only halfway through the hurricane system, which could drive prices back into the $70 or higher range.
In a surprise move, Talisan in Canada is selling its tar sands holdings. No one is exactly sure why since the Alberta deposits are viewed as a hot commodity, with even the Chinese trying to buy into the field. Low speculates that Talisan might be concerned about the state of the U.S. housing market and its impact on the economy, which could be cooling off. Also, processing tar sands into synthetic crude is very energy intensive using huge amounts of natural gas, and with Canada's gas fields having peaked, driving up prices and reducing the profitability of tar sand processing. Lower oil prices could also make investments in oil sands less attractive.
Equally surprising is the potential impact of the reconstitution of a democrat parliament -- this one including women -- in Kuwait. It seems lawmakers there are calling for an honest appraisal of the true size of Kuwait's oil reserves, now believed to have been overstated by twice their actual size.
If the Kuwaitis officially acknowledge the true size of their fields -- and importantly -- begin to implement what is, in effect, an oil depletion protocol, it could establish a much needed precedent where all oil producing nations publish truthful assessments of their own reserves. Such a move, however, would have a profound impact on the market and global economy, especially if it were revealed that the world doesn't have as much oil as has been claimed.
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