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May 26, 2002

The production and reserves statistics for the year 2001 arrived. Updating the U.S. and World plots in chapter 8 of Hubbert's Peak caused no changes in the predictions. The world oil production in 2001 was down a tiny bit, probably because of Sept 11 and the dot.com bubble burst.

With some help from the Russians, OPEC is getting oil prices into the upper-twenties range that they prefer. The natural gas price, which usually tracks the oil price, has been surprisingly high: around $3.40 per mmbtu.

Although Russian oil production and exports have been rising, there are no significant new-field discoveries reported. One interpretation is that the new cash flow is funding long-deferred maintenance. A recent report suggested that the Russians were losing a million barrels per day in pipeline leaks. Replacing a rusted-out downhole pump not only restarts production; twenty years worth of oil has accumulated adjacent to the well bore. Although the restoration of Russian production is a significant help, it will be temporary unless there are new discoveries and extensions of existing fields. One of the Russian companies, YUKOS, took a full-page ad in the May 23 New York Times stating that they are now, "among the world's top ten oil & gas majors." I thought that you had to prove your stuff in order to join the majors: bribe a U.S. senator, crash a loaded tanker on the rocks, run the gasoline price above $3 per gallon.

The biggest intellectual surprise appeared as two white papers by Matthew Simmons. Both are available at www.simmonsco-intl.com in Simmons' speeches and papers section. The two key papers are The World's Giant Oilfields and Unlocking the Natural Gas Riddle. In the Giant Oilfelds paper, Simmons uses two data streams that are not used in the Hubbert analysis: the current production rates and dates of discovery of major oilfields. In the year 2000 the world had 26 oilfields that produced more than 300,000 barrels per day. All but two of those 26 fields were discovered more than 25 years ago. His natural gas analysis is potentially even more scary than my Hubbert's Peak prediction.