‘No panic’ over oil reserves, says BP

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Speaking at a 21 June conference in Brussels, BP’s Chief Economist Peter Davies presented the petroleum giant’s annual Statistical Review of world energy markets for 2006. In addition to discussing major energy trends, Davies gave assurances that fears over an imminent oil shortage are misguided.

  • Peak oil

The “peak oil” theory, proposed by some geological experts, states that the world has reached or is close to the point of maximum oil production (see our LinksDossier). 

But Davies has firmly refuted the peak oil theory, saying it is “absolutely unreasonable” to think that new oil reserves will not be found in the coming years, and adding that known reserves in places that are difficult to reach will likely become accessible through technological innovation. Future potential deep-water oil extraction in places such as the Gulf of Mexico may be part of BP’s future strategy (see EURACTIV 6/09/2006).

In the absence of new discoveries, BP’s figures suggest that there are approximately 40 years’ worth of “conventional proved oil reserves” remaining at current production levels.

  • Oil demand will decline anyway?

Davies also alluded to a less common suggestion that concerns such as energy security, not resource scarcity, will be the biggest “driver” pushing down global demand for oil. 

Supporting this claim, Harvard University Professor Joseph S. Nye suggests that while oil demand in the US is unlikely to recede significantly in the near future, in the longer term a new “Geo-Green” coalition between liberal environmentalists and foreign-policy hawks, who are concerned about dependance on “foreign” oil, might succede in pushing through policies to reduce US oil consumption.  

  • Cautious on renewables

When asked why renewables did not feature in this year’s Statistical Review, Davies responded that energy output figures for renewables such as wind and solar have not yet been “significant enough” to feature in the text. 

While Davies did not necessarily preclude a role for renewables in the future world energy outlook, he also stated that BP is not necessarily investing in technologies just because they are renewable per se. The company seeks rather to invest in technologies that are cost-effective and that will simultaneously bring down emissions, mentioning in particular a combination of “clean” coal and carbon capture and storage (CCS) technologies.

  • Looking to 2nd generation biofuels 

Currently, biofuels account for around 1/2 million barrels out of 85 million barrels of daily global oil production. 

Despite this small figure, Davies said: “We think biofuels in particular are something where there is huge potential if we can get this technological leap [to 2nd generation biofuels].” 

  • Finding the right carbon price

In response to audience concerns over climate change, BP placed a great deal of emphasis on the importance of properly functioning carbon trading systems, with “property rights” for the climate. 

BP is looking in particular to the 3rd period, beyond 2012, of the EU Emissions Trading Scheme (EU ETS), saying that while a price of €25 per tonne of CO2 (the current forward price for the period 2008-2012) can provide some incentive, a €40-50 per tonne price with increased auctioning would be much better from an economic point of view. 

Global CO2 caps “are not tight enough to really provide a fundamental incentive”, Davies said, pointing out that under current carbon trading regimes the world remains “squarely on a trajectory of rising CO2 emissions”.  

Every year since 1951, BP has presented a Statistical Review of World Energy, considered one of the most authoritative reports on the state of global energy markets.

The main trend highlighted in this year's review was a decline in global energy demand growth in 2006, despite record-breaking global GDP growth in the same year. The trend is explained by high oil prices and by a particularly warm winter in many industrialised nations, according to BP.

Davies also spoke with EURACTIV in the margins of the conference, organised by Friends of Europe.

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