The following article is reprinted from the Oil & Gas Journal OGJ Special of Dec. 29, 1997 with permission of John C. Kennedy, editor, and features a forward by Roger Herrera, president of Achorage-based Northern Knowledge, an Alaska consultancy involved in oil & gas, environmental issues and energy politics. Emphasis added. Ed.
It was particularly interesting to read an article in the Oil and Gas Journal by geologist Colin Campbell. His article grasped the nettle of predicting future production of world-wide oil and when it might start to decline.
Campbell believes that the easy, conventional off, which we have been happily using for the past 140 years, will start to decline in the next year or two. That in itself is no big deal because the five Arab producing countries around the Persian Gulf will retain the ability to meet supply by increasing their production from huge remaining reserves. However, by controlling the supply of world oil they will also be controlling its price.
The rise in price will then kick in what Campbell calls non-conventional oil, which will be quite sufficient to fulfill world demand for another decade or so. After that, the "oil era" will begin to phase out.
Campbell's conclusions are not quite unique. In fact they are closely duplicated by another recent scientific paper written by Richard Startzman and A. S. Al-Jarri of Texas A and M, which was delivered at the Society of Petroleum Engineers conference in October, 1997. Those authors give us a few more years of leeway before the inevitable happens, but they are not starry eyed optimists for our long term oil future.
I find Campbell's article very compelling if only because he and I shared a tent in the jungles of Papua, New Guinea on and off for a couple of years while we looked for oil among the leeches, snakes and stone age civilization of that island some 30 years ago. He has a doctorate in geology from Oxford University and has worked in many parts of the world for major and smaller oil companies. Above all, he is a towering intellect whose work cannot, in my opinion, be dismissed as eccentric or academic.
As an Alaskan, I have to ponder on the impact to our state if Campbell is correct. Our production is obviously in decline, but we have the future promise of North Slope natural gas, the bounty of which may lie beneath the coastal plain of ANWR and NPR-A, the numerous satellite fields around Prodhoe Bay and Kuparuk, and, the hope for "No decline after '99." It all sounds rather comforting, but is it?
The one thing that we can rely on is that the present circumstances of the El Nino winter and the Asian economic upheaval are temporary aberrations. We also know that the Clinton administration is temporary-at least in its impact on energy policy. Consequently, the Campbell thesis that the price of oil will rise in the next few years is unlikely to be materially delayed by world economics or U.S. politics. It remains inevitable that the Asian countries will demand more and more of the world's oil, especially from the Middle East. The United States will continue to be comfortable importing increasing amounts of Venezuelan crude and oil from Mexico and Canada, and is unlikely to embrace energy conservation until we are facing a situation much more frightening than President Jimmy Carter's "moral equivalence of war."
It is interesting that Venezuela, which is undergoing something of an oil renaissance since it de-nationalized its oil industry, is the biggest cheater on OPEC production quotas, but is the first OPEC country to suggest curtailing the cartel's crude output in order to push upwards the present price of oil. If Venezuela succeeds in this effort, even as a short term fix, it will reconfirm OPEC's ability to control the price of oil, for the first time since 1979. It will also illustrate the lack of influence the United States has on the oil market despite its gun boat diplomacy in the Middle East and the fact that we now import only modest amounts of crude from that region.
All of these circumstances strongly suggest that Alaska is more likely to profit from the oil outlook in the near future than not. However, we cannot rely on the federal government to make sensible decisions to help us develop future energy resources. On the other hand, we cannot sit back and hope that Campbell's forecast is correct, or that OPEC increases the price of oil. Our Arctic oil and gas takes too long to develop for us to wait for external events to trigger the opening of ANWR or the building of the gas pipeline. We must be proactive.
As citizens, we are amazingly mute considering our total embrace of the Permanent Fund dividend checks and the poll figures showing very high support for responsible oil...