OTC 2002 -- More offshore projects needed to keep production flat
  from: Jerry Greenberg
  by: OilOnline
  Tuesday, May 07, 2002

More offshore projects are necessary worldwide just to keep production flat, said Matthew Simmons, President of Simmons and Company International, but the role of mega majors in that scenario may be limited if the prospects are small. He asked if the majors can conduct more projects simply because they may be smaller.

Simmons, moderator of a panel discussion at the Offshore Technology Conference (OTC) entitled The Role of Offshore Energy in the Global Energy Arena, said it is difficult for large companies such as Shell or BP to justify taking on a 50,000 b/d project. The fact that the industry is running out of elephants to be discovered may mean that mega majors have possibly painted themselves into a corner.

They (mega majors) aren’t set up structurally to conduct multiple small projects, Simmons noted. He said that independents are the key to a future because they can handle the structure of smaller projects.

He also said that independents, while previously not welcomed in the North Sea because the region was deemed too complex for them to operate, will now become active in the area because they have become technology companies and are structured to "tackle the rabbits."

However, he said, he questioned whether giant oilfields were reaching peak production and whether there is sufficient knowledge about peak production of fields in Iran or Saudi Arabia, for example. He said the 14 largest oilfields were basically discovered before 1950 and the latest field to contain more than 1 million barrels of reserves was the Cantarell field in Mexico discovered in the 1970s.

"Nobody will know when the fields reach their peak production until it becomes so obvious that it has happened," Simmons said.

Simmons also addressed recent scenarios that the US can do without Saudi Arabian oil and that Saudi oil could be made up with oil from Russia.

"That is dangerous thinking," Simmons said. "That scenario is fine as long as we are willing to go back to the Stone Age."

In regard to oil demand Simmons said that unless population growth is slowed, OPEC countries as a group will be the largest oil consumers by 2030. In Saudi Arabia, for example, the population was about 6 million in 1970 and 22 million people in 2000. With the present birth rate, there could be 40 million people between 2010 and 2014, he said. With the greater population, water use will increase. Energy consumption could increase 40% just to operate water desalination facilities, Simmons noted. A result is that Saudi Arabia would need a higher oil price in order to continue to export oil.