Petrobras CEO: Peak Oil Production is Now

Climate change, peak oil, water and other resource peaks, in my view, are leading us towards a perfect storm that is sure to destroy the world’s economy and may even cause the collapse of our Industrial Civilization.

More and more industry insiders are coming forward with warnings every day about Peak Oil. Now, Jose Sergio Gabrielli, the CEO of Petrobras, one of the world’s largest oil companies, has come forward and is claiming we have reached Peak Oil.

This doesn’t mean we will be running out of oil any time soon. What it does mean is rapidly rising fuel price. As with other unstable systems I think we will see a lot of oscillation (rising and falling) of oil prices but with a continuous downward trend in availability and a continuous upward trend in price.

Oil is used to make just about everything we use in our society to include food so we can expect to see everything we buy going up in price until many of you can’t afford much more than the basics.

As tough as things might get you don’t have to become a victim as there are many things you can do to prepare. I think the most important step you can take is to help build resilience within your own community through the Transition Towns Movement. Don’t put it off till it’s too late.

Below you will find an article about the CEO of Petrobras.

Ronnie Wright

World Change Café

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Petrobras CEO: Peak Oil Production is Now

by Josh Garrett

On Thursday, the energy blog TheOilDrum.com reported on a December 2009 presentation by Petrobras CEO Jose Sergio Gabrielli in which he estimated that world oil production would peak this year. Gabrielli, head of Brazil’s national oil company, joined the ranks of other international oil honchos, including former Aramco executive Sadad al-Husseini and Total’s CEO Christophe de Margerie, in stating that the level of global oil production cannot keep pace with growing demand. The logical result of this trend is oil scarcity that will lead to quickly rising crude prices in the next few years.

Gabrielli’s assessment of world oil supplies takes a wide view of all sources and includes predictions of demand growth to 2030, divided into four possible scenarios that range from modest (“divided attention”) growth to intense (“predatory”) growth. Even under the most optimistic projection of supply growth and the most conservative estimate of demand growth, world oil demand is forecast to exceed supply by the year 2014.

In Gabrielli’s view, oil production rates are falling too quickly to keep pace with demand—although new oil extraction projects around the world will boost supplies enough to keep pace with demand over the next few years, that growth will not be sustainable. Gabrielli summarized his view of the world’s oil future with this statement: “the world needs oil volumes the equivalent of one Saudi Arabia every two years to offset future world oil decline rates.”

In what could be classified as a preemptive counter argument to peak oil opponents, Gabrielli’s presentation takes into account major oil discoveries of the last 10 years and their contribution to future world production levels. The problems with relying on new discoveries to pick up the supply slack are twofold: new discoveries take several years to produce significant levels of crude, and the oil from these discoveries is of a lower quality than much of the easily-recoverable oil that is common today. To prove the first point, Oil Drum writer Tony Eriksen cites a massive oil field in Kazakhstan (considered the largest discovery of the last 30 years) as an example: “the large Kashagan discovery in 2000 [was] supposed to start production in 2005, but the earliest start date is now 2013.” To support the second point, Gabrielli notes that the quality of newly discovered crude will also limit its contribution to global production levels.

As oil companies drill deeper for crude, the resulting product is increasingly sticky (“heavy”) with higher sulfur content (“sour”). Heavier crude requires more energy to refine, and higher sulfur content places an additional burden on the refining process, as sulfur is basically an impurity that must be removed from the crude in order to produce most useful fuels. Lower quality crude not only adds expense to the refining process, but also requires new refineries to handle the new product. As Eriksen writes, “Gabrielli points out that refineries need to be matched to the type of oil being produced. Recently, world oil production is becoming heavier and more sour which requires suitable refineries. The construction of these refineries can take several years.” While new fields slowly increase to maximum production levels and specialized refineries are constructed over a span of several years, world demand will continue to increase at an accelerating pace.

Gabrielli’s comments echo those made, in September of last year, by economist Jeff Rubin. Their numbers on demand increases and decline rates are very similar and the conclusion of both of their scenarios is a rapid demand increase that will drive oil prices skyward in the next two to five years. While Rubin focuses on the cost of crude production driving up oil prices to bank-breaking levels, Gabrielli hones in on production’s inability to meet demand. Rubin extends his scenario to make a prediction that it will result in the collapse of the global economy while Gabrielli simply presents his data with the assessment that the world is headed toward a “supply crunch” that will manifest in the next four years.

Should we take Gabrielli’s assessment seriously? The fact that he is the head of one of the largest and fastest-growing national oil companies in the world certainly lends him some personal credibility. His data is drawn from well known and respected sources like consultancy Wood Mackenzie, investment firm Merrill Lynch, and the International Energy Agency. His analysis takes into account supply contributions from unconventional sources such as Canada’s tar sands and even includes biofuel supplies. Though Gabrielli’s predictions, at this point, amount to not much more than elaborate guesses, it appears likely that they will be at least somewhat accurate.

Barring earth-shattering breakthroughs in oil extraction technology or massive increases in biofuel supply volumes, Gabrielli’s scenario portrays a world where there is simply not enough fuel to go around. This would unfortunately mean higher crude prices that could reverberate through the global economy, raising prices of gasoline, heating oil, and nearly all consumer goods. Though they do not amount to a cause for panic, Gabrielli’s predictions rightly possess the power to at least make one wonder: what happens next?

Republished from http://www.heatingoil.com.