Peak Oil: This Saudi Doesn’t Understand Either

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Peak Oil will always be a controversial theory… always.

But it’s a reality.

What’s maddening is explaining it over and over again to people that don’t get it.

For example, as Dr. Sami Al-Nuaim reported in the Saudi Gazette:

In the last few years, there were several attempts from several non-specialized writers in the Saudi media to advocate for what is called “Peak Oil Theory” that wrongly predicts dark future for oil production. 

This theory was introduced in the US after the oil embargo in early 70s by some bankers stating that when 1/2 of the oil reserves in any field is produced, the production will follow steep decline. This concept is based on a probability theory that is not linked to any scientific facts or physical laws that govern oil production in oil reservoirs. 

In addition, what makes this theory completely false is the fact that it totally ignores the impact of technological advancements in increasing the recovery factor and the probability to find new oil discoveries.

I hope he’s joking, though.

As I’ve said, peak oil does not refer to the amount of oil we have left.

Peak oil refers to the flow rates. It refers to the fact that the “easy to get to” oil is gone. It’s the “hard to reach” expensive oil that we now have to go after. Hydraulic fracturing – like I said – is more expensive than traditional drilling techniques.

Even my old friend – and former colleague, Chris Nelder will tell you this.

There has always been a lot of confusion about this point. Peak oil was never about “running out of oil.” The only people who characterized it that way either didn’t know what they were talking about or were trying to confuse the issue.  Peak oil has always referred to the production rate of oil — it’s about finding the point where that production rate peaks.

It’s why we’re now going after the expensive “hard to reach” oil in places, such as Alaska’s North Slope, which is turning out to be pretty exciting stuff.

As we told you:

Petroleum geologist Ed Duncan recently told Energywire that Alaska’s North Slope geology may “yield bountiful untapped resources as vast as the unconventional oil plays at Texas Eagle Ford and North Dakota’s Bakken shale fields.”

Duncan apparently shocked the oil industry when he picked up half a million acres in an area once dismissed by other energy giants.  The shale Duncan is looking at could hold up to two billion barrels of technically recoverable oil and up to 80 trillion cubic feet of natural gas, according to a 2012 US Geological Survey. 

And, as The New York Times just reported, “the State Legislature in Juneau has granted oil companies an estimated $750 million in annual ta relief to increase investment in the giant North Slope oil field.”

They’re just as excited about it as we are.

“The tax change, approved on Sunday, was a major victory for Exxon Mobil, ConocoPhillips and BP, which had lobbied hard for years to repeal a tax system put in place by former Gov. Sarah Palin in 2007 that made state oil taxes among the highest in the nation. The companies have long claimed that high operating costs and taxes in Alaska encouraged them to move their investment dollars to other states with lower tax rates, like Texas and North Dakota, where oil and gas exploration and production have been booming in new shale fields.”

Ignore those that have no idea what peak oil theory really is.

For a Saudi to get the theory wrong is just laughable.

Not only will The Cheap Investor’s Royale Energy (ROYL) recommendation benefit from the North Slope trend, the majors will, too.

In fact, days after the Alaska Legislature lowered taxes ConocoPhillips said it would boost investment in the North Slope area, too.  Alaska’s oil industry is likely to surge on what’s happening lately.  And we’ll be there to profit.

Better yet, according to the Alaska Journal:

BP did not identify specific projects the company would pursue, but was upbeat about the tax change.  “As a package, this is an important step forward and will help us compete for more investment. This puts Alaska back in the game,” said Janet Weiss, BP’s Alaska region president.

ExxonMobil was also positive on the change.  “We believe Senate Bill 21 provides significant progress towards making Alaska’s investment environment more globally competitive and could lead to additional investment and production,” company spokesman Patrick McGinn said.

Again, The Cheap Investor has been committed to this wild growth with a position in Royale Energy.  Stay tuned for more.