The Author of this Article, Mark Jago is a semi-regular contributor to this Blog, however his insights on issues of the day, are to be increasing found in the comments section of articles published online by the better UK Newspapers.
An article in The Times "Oil companies in rush for London Stock Exchange listings" during the weekend paper got me thinking that while there is much hype over energy there is very little factual information made available to the public. The UK Government does not freely give out information about consumption and North Sea production. What UK figures I have is gleaned from various sources. Other information I have found on the following web sites:
Energy Information Administration (US Government), CommodityOnline and Platts.
Those of you that have seen my previous blogs about Oilexco will understand that I am an investor with vested interests and definite opinion on the conduct of the UK Government and the Royal Bank of Scotland. The Times weekends article highlights the North Sea energy resource as little more than an opportunity for the Government and financial industry to make quick money at the expense of the Oil Companies, investors and UK energy consumers. My comment attached to the Times article implies that it's all little more that a shell game, you can guess what I mean by that….
There are an estimated 22 billion barrels of possible oil equivalent energy resources in the UK North Sea. Much of this is high grade Brent crude combined with significant quantities natural gas. While Oilexco was a relatively small company it operated drilling rigs partnered with a number of other oil companies that made up a large portion of the North Sea development. Oilexco production was just coming on line at a cost around $15/barrel when the RBS forced it into bankruptcy protection. A six month extension of the RBS loan at minimal cost would have seen Oilexco through its difficulties, a fact that the Government was made aware of but failed to offer its support.
When you read the following information, be aware that during tight energy demand periods 200 additional barrels of daily production can make the difference between $80US and $160US/barrel oil pricing. China, US combined daily oil consumption accounts for roughly one third of daily world production. UK consumers pay double the price that North Americans pay for their energy as a consequence of Government policies and practises.
It is important to understand that oil storage in tankers is insignificant (140 million barrels est.) when compared with current world oil consumption. Chinese daily oil consumption was estimated to be 7.9 million barrels in June 2009 and oil consumption was up 12 percent over the period from 2007 to 2008. China's population is 5 times size of the US, Chinese new car sales are currently estimated to be running at one million a month and the economy is expanding annually at a rate estimated to be between 8 to 10 percent. Peak US daily oil consumption was between the years 2004 and 2005 at a rate of 20 to 21 million barrels, current daily consumption is between 18.5 and 19 million barrels and is expected to start to increase again in 2010. World daily oil production for the first three months of 2009 is estimated to be 8o million barrels down from a peak of 87 million barrels.
Oil consumption is expected to increase next year by 1.26 million daily barrels. Currently increasing Asian oil demand is offsetting other areas of world demand destruction. World oil production last year was closely in line with consumption.
The UK Government had expected to see 2010 North Sea Oil production increase to 3 million barrels of oil equivalent per day. Their mismanagement of the resource will see UK production down to between 1.5 and 1.2 million barrels per day.
Much of the new oil production now coming on line is low quality which many refineries find difficult to refine and has to be mixed with higher grade oil. This leads to a problem, whilst much of the 'new oil' is low grade, new sources of premium oils of the quality of Brent Crude from the North Sea are becoming increasingly scarce.
Add to these woes, is that many of the new oil fields now starting production have short estimated production lives of eight to ten years. But of course new oil field discoveries are often announced, but it is important to understand it can take up to ten years for these to put into production, even in normal times.
But the financial crisis has had a significant negative effect on companies engaged in oil field exploration and even on the development of those fields already discovered and that should be in the process of being brought on line.
The increasing future demand for oil is unlikely to be met by the current level of new development. Like it or not, the world is going to have to come to terms with consuming less oil at higher prices. The UK is not "well placed" to deal with this growing problem.
An article in The Times "Oil companies in rush for London Stock Exchange listings" during the weekend paper got me thinking that while there is much hype over energy there is very little factual information made available to the public. The UK Government does not freely give out information about consumption and North Sea production. What UK figures I have is gleaned from various sources. Other information I have found on the following web sites:
Energy Information Administration (US Government), CommodityOnline and Platts.
Those of you that have seen my previous blogs about Oilexco will understand that I am an investor with vested interests and definite opinion on the conduct of the UK Government and the Royal Bank of Scotland. The Times weekends article highlights the North Sea energy resource as little more than an opportunity for the Government and financial industry to make quick money at the expense of the Oil Companies, investors and UK energy consumers. My comment attached to the Times article implies that it's all little more that a shell game, you can guess what I mean by that….
There are an estimated 22 billion barrels of possible oil equivalent energy resources in the UK North Sea. Much of this is high grade Brent crude combined with significant quantities natural gas. While Oilexco was a relatively small company it operated drilling rigs partnered with a number of other oil companies that made up a large portion of the North Sea development. Oilexco production was just coming on line at a cost around $15/barrel when the RBS forced it into bankruptcy protection. A six month extension of the RBS loan at minimal cost would have seen Oilexco through its difficulties, a fact that the Government was made aware of but failed to offer its support.
When you read the following information, be aware that during tight energy demand periods 200 additional barrels of daily production can make the difference between $80US and $160US/barrel oil pricing. China, US combined daily oil consumption accounts for roughly one third of daily world production. UK consumers pay double the price that North Americans pay for their energy as a consequence of Government policies and practises.
It is important to understand that oil storage in tankers is insignificant (140 million barrels est.) when compared with current world oil consumption. Chinese daily oil consumption was estimated to be 7.9 million barrels in June 2009 and oil consumption was up 12 percent over the period from 2007 to 2008. China's population is 5 times size of the US, Chinese new car sales are currently estimated to be running at one million a month and the economy is expanding annually at a rate estimated to be between 8 to 10 percent. Peak US daily oil consumption was between the years 2004 and 2005 at a rate of 20 to 21 million barrels, current daily consumption is between 18.5 and 19 million barrels and is expected to start to increase again in 2010. World daily oil production for the first three months of 2009 is estimated to be 8o million barrels down from a peak of 87 million barrels.
Oil consumption is expected to increase next year by 1.26 million daily barrels. Currently increasing Asian oil demand is offsetting other areas of world demand destruction. World oil production last year was closely in line with consumption.
The UK Government had expected to see 2010 North Sea Oil production increase to 3 million barrels of oil equivalent per day. Their mismanagement of the resource will see UK production down to between 1.5 and 1.2 million barrels per day.
Much of the new oil production now coming on line is low quality which many refineries find difficult to refine and has to be mixed with higher grade oil. This leads to a problem, whilst much of the 'new oil' is low grade, new sources of premium oils of the quality of Brent Crude from the North Sea are becoming increasingly scarce.
Add to these woes, is that many of the new oil fields now starting production have short estimated production lives of eight to ten years. But of course new oil field discoveries are often announced, but it is important to understand it can take up to ten years for these to put into production, even in normal times.
But the financial crisis has had a significant negative effect on companies engaged in oil field exploration and even on the development of those fields already discovered and that should be in the process of being brought on line.
The increasing future demand for oil is unlikely to be met by the current level of new development. Like it or not, the world is going to have to come to terms with consuming less oil at higher prices. The UK is not "well placed" to deal with this growing problem.
