What have you got for me next week?

Posted on 08 September 2009

Last week, peak oil skeptics could breath a sigh of relief when “BP announced… a giant oil discovery at its Tiber prospect in the deepwater Gulf of Mexico.“ 

At 11km deep the drilling itself is notable, but the real excitement comes from parsing the word “giant.”  As the FT points out, the IEA defines the term as fields with 500m to 1b proven and probable barrels.

Where does Tiber score? It is likely that BP needs more data before disclosing the numbers but did say, “Tiber represents BP’s second material discovery in the emerging Lower Tertiary play in the Gulf of Mexico, following our earlier Kaskida discovery.”   Given that Kaskida is 3b barrels in place and 300-500m recoverable, Tiber is most likely larger if it is going to fill a giant’s shoes.

This, no doubt, is valuable to BP shareholders but we are not sure today’s giants are what they used to be in the greater context of oil supply and demand.  If today’s demand rate is roughly 84 million barrels-per-day into an optimistic 1,000 million barrels of recoverable oil, then Tiber is worth 12 days of global supply in the grand scheme of things.

But current reserves are depleting at a current rate of 6% per year and accelerating.  Also adjust for the energy intensity of Tiber’s extraction given its depth and location. Add global demand growth, and we estimate you shave 5 of the 12 days of supply from the total.  Now BP has given the world a week’s worth of supply, which is why we ask what they are going to do for next week?

UPDATE:

David Strahan, a UK journalist and film-maker and author of “The Last Oil Shock: A Survival Guide to the Imminent Extinction of Petroleum Man”, made much the same points about the Tiber news when he was interviewed on BBC World Business Report on September 2, 2009. His web site contains numerous articles on the issue of oil depletion.