The head of Oklahoma’s largest independent producer of oil and natural gas debunked the myth of peak oil on Wednesday, saying the biggest hindrance to recovering new reserves of oil and natural gas are governments and their policies.
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Larry Nichols , chief executive of Devon Energy Corp., attacked taxation and other restrictive governmental policies both abroad and at home during a presentation at Oklahoma State University’s annual energy conference.
First predictions that the United States had reached its ultimate production of oil initially surfaced after World War I, he said, when government officials predicted the country had found all the oil it would.
Throughout the 1900s, the prediction periodically resurfaced, he observed.
“And every time, it was wrong, and it was wrong for the same reason — technology,” he said. “Technology keeps inevitably opening up new areas in the U.S. and around the world that were heretofore unknown about. And that is still happening today.”
Nichols observed the oil and natural gas industry faces more challenges today than ever, though, and he talked about those challenges in depth.
Supply versus demand
Demand for oil already is outpacing supply, and that demand is quickly growing.
More cars were sold in China in 2007 than were sold in Japan, he noted. Forecasts are that car sales there will surpass those in the U.S. in less than a decade.
Surplus oil production from the Organization of Petroleum Exporting Countries, meanwhile, is basically gone — the surplus oil it has today can’t be refined in most countries, Nichols said.
“And, of course, oil prices are following that,” he said.
Oil is costing more here in the U.S., he said, because of the weak U.S. dollar.
Natural gas demand, meanwhile, also is up.
Meanwhile, domestic companies are working harder than ever to replace natural gas reserves, and actually are growing those — something they need to do to maintain profitability for their investors.
“You would think in that kind of circumstance, we would be focusing on increasing our oil and natural gas reserves, making ourselves more independent. We do have a lot of reserves that are there, but the political challenges and the social challenges we have to get that oil out are really quite intense.”
Restrictions abound
But instead of allowing oil and natural gas companies access into many areas where known reserves exist, the U.S. government instead has restricted access to those areas.
Nichols said known gas reserves totaling about 450 trillion cubic feet equivalent are off-limits both off- and on-shore in the U.S. because governmental restrictions.
“That is a lot of gas,” he said, “and these restrictions really expose the hypocrisy of so many of our politicians who talk about their great desires to achieve energy independence and at the same time impose these restrictions on drilling.”
Nichols said those can be corrected in time, but not before they cause significant economic harm. He also said he supports the development of alternative fuels, but only those that don’t harm the environment.
Nichols used the Barnett Shale, a natural gas field in north Texas, to illustrate how new technology can benefit the country when it comes to obtaining new petroleum reserves. Today, that field produces 7 percent of the country’s natural gas.
“Don’t get me wrong. I support the development of alternative fuels, because one day, we will run out of oil and natural gas” and the country needs to be ready, he said.
“But to throw out what has gotten us here ... is putting the U.S. at a very significant risk.”
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It's easy to blame the 'government', but 'government isn't the issue. The U.S. Energy Information Administration data indicate that the world production of crude peaked in May of 2005. The EPA didn't have anything to do with that. I'm not sure what it is going to take for the U.S. to figure out that free market petroleum pricing can destroy the U.S. economy. Airlines are going bankrupt with fuel costs being cited as a primary reason. At some point, we may have to subsidize elements of the transportation sector, like truckers, or nationalize the energy sector completely. There aren't any easy answers, and wishing for technological solutions is magical thinking. It really is going to get very bumpy.
It seems like the CEO of a major energy company would know that U.S. oil production peaked in 1970, and no amount of technology or new discoveries (Alaska North Slope, GoM Deepwater) has changed that.
Aaron, but Jimmy's right. "Technology improvements along with opening drilling in some areas can help buy more time" is true.. BUT how much time? Maybe a year or two? The title claims a debunking of Peak Oil. I found not one bit of debunking in the article, only rants at the government, that we're not allowed to use up our resources faster. Sorry. BTW, rising oil prices will do more than anything else to promote substitutes... Cheers, Dom
Jimmy, your analysis seems flawed to me. What I read describes the ARTIFICIAL production shortages caused by governmental regulations. Of course we are peaking our production because of these restraints. Technology improvements along with opening drilling in some areas can help buy more time and further develop our alternate energy technologies. Why put our economy at risk just because it’s popular to be green.
Energy use is distributed in our economy by source type. Coal and natural gas power most of our electrical generators, along with nuclear, hydro, wind and solar. Petroleum is the source fuel for the transportation segment of our economy, and therein lies the problem. Our transportation demands are higher than our national capacity to supply them - hence, we import petroleum to fuel our cars and trucks. Our transportation system is also very inefficient, and the discomfort we are all going to feel with $4.00 gasoline is a result, partly, of that inefficiency. The 'other energy options' we are going to explore are going to include riding a bicycle and walking. Now, here's the real issue. Even if the 'government' went away and all our recoverable reserves were allowed to be produced, we don't have enough reserves to get us where we need to get to - which is a transportation sector that doesn't run on petroleum. The U.S. now has competition for the remaining world supplies of petroleum, with industrializing populations that dwarf us in comparison. Driving your car is going to get very, very expensive. Buckle up, boys and girls, this flight is going to get some severe turbulence!
It's a National Security as well as an Economic issue
for the Government to stand in the way of bringing the resources to the American consumer while we explore other energy options.
Mr. Nichols didn't debunk 'peak oil'. "...because one day, we will run out of oil and natural gas...". Mr. Nichols merely says it is out in the future, somewhere. Let's all get on the same page here. Let's all get on the same page here. The U.S. reached the height of its production in the early 1970s. 'Peak oil' is about production, not reserves. In spite of technology, in the last 35 years U.S. production has steadily declined, and is declining in many of the major fields around the world, even in countries that don't have restrictive environmental rules. According to figures released by the Federal government, the Energy Information Administration, world production peaked in March, 2005. Mr. Nichols is whistling past the graveyard. Let me repeat, 'peak oil' is about production, not reserves.
Pickens says wind power may be the future 04/24/2008 Boone Pickens said in Oklahoma City on Wednesday that the nation never will become energy independent because it imports more than 70 percent of the...
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for the Government to stand in the way of bringing the resources to the American consumer while we explore other energy options.
Sounds exactly like peak oil to me!
!!!
$8.60 a gallon...so Dos move ya.