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Monday, June 26, 2006

Simmons Talking Points

Extracted from a recent Mathew Simmons PDF presentation.

"The Energy Crisis Has Arrived"
Energy Conversation Series
Department of Defense
Alexandria, VA
June 20, 2006 By Matthew R. Simmons

Modern Energy: Elixir Of Life
  • Oil is "transportation" energy.
  • Oil’s liquids make all kinds of things.
  • Natural gas creates instant heat.
  • NGLs create things, too (fertilizers and petrochemicals).
  • Coal, nuclear, hydro, wind and solar all create "light".
  • Without these energy sources, we lose a lot.
  • Any energy shortage morphs rapidly into PANIC!

    More Products Made From Oil…
    Adhesives, air-conditioners, ammonia, anti-histamines, antiseptics, artificial turn, asphalt, Asprin, balloons, bandages, boats, bottles, bras, bubblegum, butane, cameras, candles, car batteries, car bodies, carpet, cassette tapes, caulking, CDs, chewing gum, combs/brushes, computers, contact lenses, cortizone, crayons, cream denture adhesives, deodorant, detergents, dice dishwashing liquid, dryers, electric blankets, electrician’s tape, non-natural fabrics, fertilizers, fishing lures, fishing rods, floor wax, footballs, glycerin, golf balls, guitar strings, hair coloring, hearing aids, heart valves, heating oil, house paint, ice chests, ink, insect repellent, insulation, jet fuel, life jackets, linoleum, lip balm, lipstick, loudspeakers, mascara, medicines, mops, motor oil, motorcycle helmets, movie film, nail polish, oil filters, paddles, paint brushes, paints, parachutes, paraffin, pens, perfumes, petroleum jelly, plastic furniture, plastic wrap, plastics, refrigerators, roller-skate wheels, roofing paper, rubber bands, rubber boots, rubber cement, running shoes, saccharine, seals, shoe polish, shoes, shower curtains, solvents, spectacles, stereos, sweaters, table tennis balls, tape recorders, telephones, tennis rackets, thermos, tires, TV cabinets, computer ribbons, umbrellas, upholstery, vaporizers, vitamin capsules, volley balls, water pipes, water skis, wax, wax paper, etc. etc.

    Defining Some Key Words
  • Mistakes occur when "two ships pass in the night."
  • "Terms" means different things to different people.
  • Some important terms for tonight’s talk:
    – Satire
    – Gurus
    – Fools
    – Paradise
    – Beliefs
    – Theories
    – Facts
    – Proof
    – Crisis

    THE GREAT ENERGY CRISIS (2006 – 20??)
  • How this one crept up
  • What everyone missed
  • Gravity of crisis
  • How we conquer it
  • Lessons learned
    The History of Crisis

    History Is Wrought With Tragedy And Crises
  • "Hi-story" records grim tales of crises.
  • Most were unnecessary (sadly).
  • Armies only march (vs. train) to overcome crises.
  • Modern history saw escalating series of crises:
    – Old crises were mostly local
    – Modern crises became global pandemics

    Value of Historical Analysis
  • History always puts current problems into context.
  • Historical events rarely re-occur.
  • Mistakes leading to crises are often repeated.
  • Best plans usually anchored on rigid historical analysis.
  • History of crisis is "Classical Study" at its best.

    We Faced Many Crises
    Division of tax fairness
  • The Boston Tea Party
  • The American Revolution
  • Ignoring Slavery
  • The Missouri Compromise:
  • The Great Civil War(Aftermath: A nation almost destroyed - 600,000 - DEAD)

    The vanity of the "Royal Cousins"
  • A Duke’s death:
  • The Great War (Aftermath: 20 to 40 million of "the finest we had" – DEAD)

    Great War Recess Morphed Into Tragedy
    We failed to settle the Great War
  • Germany’s famine
  • The Nazi march
  • Peace in our time (18 months)…Then came war:
    September 2, 1939: Insanity in Europe explodes into WWII.
    December 7, 1941: US Navy sinks – America’s fortress crumbles.
    May 1945: Europe/UK are gone, but VE Day is here.
    August 1945: Hiroshima and Nagasaki are gone, but war ends.

    Crises Are Also Not Inevitable
    1stQ 1946: General George Marshall traverses Europe, spending six weeks with "Uncle Joe". He panics… "We will soon be back at war." "America must go back to Europe or the Depression will return." (Marshall Plan announced at Harvard)
    Result: The Four Wise men were wise!
    June 1946:
  • 2,500 Marshall Planners planned.
    1947 – 1951:
  • By Korean Crisis, rebuilding Europe was almost complete.
  • Genuine Peace In Our Time Worked

    Another Crisis Avoided Story…
    The "Cold War" Kept The Heat Of War Away

    1947: Iron Curtain created "Cold War."
    1948–1988: Explosion of armies, spies, planning and technology. Despite many "near misses" the Cold War worked.
    1989: The Wall collapsed. The Russian illusion evaporated. Billions of wisely spent dollars saved millions of lives

    The Art Of Crying Wolf: A Time Honored Gift or Mistake?
  • "The bombs never fell" (50 years defense spending - wasted).
  • Polio did not kill everyone (inoculations - wasted).
  • Sputnik was tiny piece of space (all the unneeded engineers and scientists – wasted).
  • We easily landed on the moon (the space race – wasted).
  • Y2K did not shut us down (approx. $50 Billion – wasted).
  • Maybe climate change won’t materialize (too early to tell).
  • Bird "Flu pandemic might not spread (too early to tell).
    The optimists like to say "They are just crying wolf!"

    The Energy Crisis Could Have Been Prevented
  • We were amply warned:
    – Hubbert’s cry (1949)
    – Club of Rome (1972)
    – Aramco’s Whistle Blower (1974)
    – The NYT "leaks" (1978-79)

    Facts always become crystal clear…after the fact
  • This, too, was a crisis we could have solved.
  • Planning for post-Peak Oil should have begun in 1970s.
  • It would take three decades for a "safe transition."

    Tragedies Often Leave A Trail Of Tears (Or, The Riddle Of Lost Opportunities)
  • "How easy it would have been to never pick up a single gun…" Winston Churchill in Missouri 1947 (aka "His Iron Curtain Speech").
  • "Remember the chorus of street criers who cried?"
    Dr. Colin Campbell, Jean Laherrere, Dr. Fatih Birol, Dr. Kjell Aleklett, Honorable Randy Udall, Dr. Herman Franssen, Dr. Edward Morse, Dr. Robert Hirsch.
    How could so many energy medics’ voices have not been heard? (Answer: The laughter drowned their cries.)

    What The Optimists Missed
  • Awful energy data.
  • No proof of "proven reserves."
  • OPEC’s proven reserve game (1980s).
  • Decades of lower exploration success.
  • No proof that reserves still grow.
  • Acceleration of decline curves.
  • Limits of oilfield technology.
  • Etc., Etc., Etc.

    Why We Slept
  • Aramco and others believed Middle East oil was "boundless."
  • Economists believed oil prices would steadily fall:
    – "$1.25 oil is too expensive." M. Adelman (Dec. 1969)
    – "Cost to extract all natural resources falls over time." J. Simon (1980)
    – "Drowning in Oil – Oil prices are falling to $5 for a decade" The Economist. (March 1999)
    – Energy Crisis? Phooey! – Yergin, Tillerson, Browne (2006)

    Current Scoffer Statements
  • "No one wants our oil – even our light oil." (Saudi Arabian Petroleum Minister, June 2006).
  • "While current prices will stay high, oil will then fall to $40 before falling lower." (Lord Browne of Mattingly (BP), June 2006).
  • "The world has 10 trillion barrels of oil left." (Rex Tillerson (ExxonMobil) on Today Show, May 2006).

    We Had No Fuel Tank
  • Can’t run out of gas when fuel gauge is "empty."
  • World never invented a real fuelgauge for: – A town, city or region
  • We created rough estimates of OECD "stocks."
  • We used the Energy Information Agency (EIA) weekly stock report as a proxy for a gauge.

    "Reported Stocks" Are Merely Samples Of "Primary Stocks"
  • Reported "stocks" are samples of "Primary Stocks."
  • Primary stock is storage exceeding 50,000 barrels.
  • Rest of stocks (secondary, tertiary) are probably greater amount.
  • Estimates are "educated guesses of samples."
  • Total petroleum stocks include:
    – Crude in system (pipelines, tankers and tank farms)
    – Refined products work in process
    – Finished stock

    The War Of "Weekly Reports"
  • American Petroleum Institute (API) issued their reports first (until 2003).
  • No enforcement of EIA’s sampler reports.
  • Few historical revision adjustments were seen.
  • No evidence on physical testing ever performed.
  • Traders jump on EIA/API numbers like bookies at track.

    Other Data/Red Lights Missed (Whilst We Slept)
  • Dwindling rigs.
  • Aging workforces.
  • Rusting iron.
  • Aging refineries.
  • Evaporating cushion.
  • Accelerating decline curves.
  • End of technology – work all done.
  • Low prices dissipated a once robust industry.
    A happy ending was not in the cards

    "We Woz Wrong" – The Economist
  • While powerful voices of optimism boom, facts are pouring in too fast.
    Fact: Out of capacity for:
    - Oil and gas supply cushion
    - Oil and gas supply growth
    - No spare drilling rigs
    - No spare refining capacity
    - Shrinking pool of skilled workers
    - No access to anything good
    Fact: Demand still raging ahead

    Demand Can Be "Anything"
    Use = Supply
  • "Any person has a right to hope," even demand.
  • "Hope springs eternal." – Alexander Pope, 1733.
    Energy Physics 101 (EP101)
    Energy Use = Energy Supply
    Caveat to EP101:
    "Energy cushion" can bridge a small gap

    The Formula For An Energy Crisis
    Step 1: Soaring demand.
    Step 2: Use up all spare cushion.
    Step 3: Run out of rigs, people and projects.
    Step 4: Shrink supply.

    One Of Charles Dickens’ Great Satires
    Is this the future or our future unless we mend our wrongful ways?
    The Ghost of the Future

    Have We Run Out Of Time To "Mend"?
  • Had we awakened in 1974, we never would have spent three more decades believing oil would always remain cheap because of the Middle East.
  • Had we taken Sy Hersh seriously in 1978/79: He told us Saudi Oil was a fable but we thought he was just trying to scare us.
  • Had we not destroyed our energy army, the saga of the 25 year oil depression, we would still be strong.
  • "If wishes were horses…"

    Middle East Oil Will Not Bail Us Out
  • Boundless Middle East Oil was a myth.
  • 35 – 40 giant fields were found (1927 – 1972).
  • All are now "very mature" and involve complicated production:
    – Rising water cuts
    – Steadily tight rocks
    – Heavier and more sour crude
    – Rising corrosion problems
  • Abundant natural gas was even more mythical.
  • Post 1972, exploration found nothing significant.

    Even Saudi Arabia’s Great Oil Resources Are Scarce
  • Seven key fields produce 90%+ of Saudi Arabia’s oil.
  • Average "life" of this produced oil is 45 to 50 years.
  • The sweet spots of these fields are almost depleted.
    Field 1994 Production (B/D)
    Ghawar 5,000,000
    Safaniya 960,000
    Abqaiq 650,000
    Berri 400,000
    Zuluf 500,000
    Marjan 400,000
    Abu Sa’fah 150,000*
    Total 8,060,000

    Nobody Saves The Best For Last
    ‘Ain Dar/Shedgum = 2 million barrels per day.

    All Giant Saudi Oil fields Are "Mature"
  • Abqaiq’s key producing areas are now "pockets" of by-passed oil.
  • Berri appears headed for a "gas blow down."
  • Safaniya/Zuluf/Marjan are losing their great water aquifer and are all old, too.
  • Shaybah is a very complex to produce reservoir.
  • Far smaller Hawtah Trend was contaminated by
    injected water.

    Are There Vast Areas Yet To Be Explored?
  • Saudi Aramco has employed state-of-the-art geophysical tools to find new oil sources.
  • So far, the only commercial success was in Hawtah Trend (200,000 barrels per day of extra light oil).
  • The remaining unexplored areas:
    – Iraq’s southern border
    – Deepwater Red Sea
    – Bottom end of Empty Quarter

    Saudi Arabia’s Real Oil Future?
  • Various old field rehabilitation projects have all been put on a fast track.
  • Rig activity has tripled in 3 years.
  • Each "rehab" project is complex and faces risks.
  • "Current" decline rates approx. 8% per annum.
  • No proof that oil production has grown in past 4 years.
  • The future is "fuzzy" at best. "TRUST ME" provides no evidence or proof!

    The Middle East Will Always Have Oil
  • Middle East oil production will not rise any longer.
  • My educated hunch of future decline:
    2006 2012 2018
    Saudi Arabia 8,000 5,000 3,500
    Iran 3,200 2,200 1,500
    Iraq 1,800 1,200 800
    Kuwait 2,200 1,600 1,200
    UAE 2,200 2,100 2,000
    Oman 800 500 300
    TOTAL 18,200 12,600 9,300
    Crude Oil Only

    How Will We Know When Peaking Was Real?
  • You only really know after the fact.
  • There is no crystal ball or "omen in the sky."
  • Facts only lead to a solid hunch.
  • Hunches, backed by genuine, solid data which are integrated into "intelligence," transform real wars into phony wars.

    Do We Have Any Time Left?
  • Not enough to stave off peak energy use crisis. The crisis has arrived.
  • If we "wait it out" difficult to stay alive without ample energy.
  • What if we simply "go to war?"
    – With what source of energy?
    – Do we even know the enemy?
    – A war without a plan is almost certainly "a lost war."

    Does It Make Sense To "Call To Arms"
  • "Will a bugle call make a difference?" Not sounding the alarm, lets the fools still dream and not realize the coming pain.
  • Starting yesterday made far better sense.
  • Better to start late than not start at all is a truism.
  • "Without ample energy, you cannot invent enough Generals." (Four star General Richard Lawson in Beijing, February 2003)
  • "Without bridges to prosperity, we might as well go home and get into our uniforms!" Brigadier General George Y.B. Yeo, Harvard Business School Alumni Association. April 1997.

    An Outline Of A Real War Plan, "How to Survive The Energy War"
  • Plan, plan, plan and fight next.
  • Get real energy data even if it takes spies and armed forces to steal the data.
  • Panics create instant "call to arms."
  • If we wait a day longer, we risk losing everything we cherish by DEFAULT and then the global lights dim…twilight turns into era of darkness.

    A Truth: Addictions Are Hard To Kick
  • Kicking the oil habit means using less transportation energy.
  • Solution is simple but complex to "integrate into a forced march out of harms way."
  • Stopping "natural gas addiction" has no working plan.
  • Natural gas is our only efficient source of instant heat.
  • Natural gas is only way to quickly cool.
  • Too much heat kills slowly.
  • Too little heat kills elderly in 30 minutes or less.
  • High percentage of globe lives outside "moderate zone."

    The "Play" Is Over… The Lights Go On!
  • Tonight’s energy discussion had no intended humor or happy ending.
  • I used war terms to connote how real the energy war is. The attack was silent, but it happened nevertheless.
  • Our military can either fight the last military fight (and probably lose) or:
    – Use its honest force to plan, organize and fight to win the energy war
    – The lights are now on… but not for very long

    Why Do I Fear The Peak Is Here?
  • No "verifiable proof" until data reform happens.
  • Wide body of strong circumstantial proof does exist:
    – Slowing of new discoveries all getting smaller
    – Most key regions are now in decline
    – Most new projects are heavy oil, deepwater and/or unconventional gas
    – Supply for non-OPEC/non-FSU has been flat or declining for 6 years
    – Demand continues to grow
    – Industry is now out of spare rigs, refineries and people

    When Twilight Sets On Middle East
  • Twilight (peaking of Middle East oil) marks twilight for the world!
  • No region in the world is ever likely to replace this gap.
  • Finding several North Sea replicas will take decades.
  • By 2020, the current 80+ mb/d base could be reduced to 25 mb/d.*
    *Schlumberger’s 8% per annum estimated global decline s 8% per annum estimated global decline

    A Clash of Ages Is Just Ahead
  • Demand for energy gathering steam:
    – Growth in use outside OECD has just begun
    – OECD use still growing every year
  • Supply got too old:
    – Decline curves are high now
    – They will accelerate
    – Too many regions now producing "brine stained with oil"

    Is It Really "Too Late?" (Or Was All This A Bad Dream?)
  • The world is probably beyond peak oil and gas.
  • If we are still close, turn around and retreat.
  • Finding new oil and gas takes decades.
  • Building a new energy army of rigs, boats, pipes, tankers, refineries, wireline trucks, seismic fleets, geo steered drilling units, etc., take decades.
  • Meanwhile, the Rust Belt needs to be rebuilt.
  • There is no army of trained personnel or teachers or recruiters of energy students.

    "The Next War" Will Be The "Last War"
  • "We" now are all addicted to oil and desperate for a fix of gas when it gets either too cold or too hot.
  • "We" used to be the U.S.A.
  • "We" now encompass everybody (6.5 billion everybody) other than tribes in the Amazon or mountains of Papua New Guinea).
  • The Big Junkies: OECD = 50 million barrels per day or 23 barrels per person per year.
  • The beginners who sample: Rest of world (5.5 billion bodies) = 35 million barrels per day or 2.3 barrels per person per year.

    Houston, We Have A Big Problem
  • The earth’s energy has peaked and its use will start to disappear.
  • It will never "be gone" but will soon be "far less than needed."
  • "No one saw this coming!" (at least almost no one)
  • Better get the armies built up.
  • This war must be won.

    Energy’s Twilight Era
  • Tonight we had an honest talk about a very real problem: The twilight of fossil fuel.
  • We all share the unforeseen consequences of problems too long ignored.
  • It is past time for debate, the crisis is here.
  • The time to educate, plan, form an energy army and march is NOW!!


    Professor Blogger Seven Star Hand said...

    Hello WHT and all,

    Now for the worst part of this horrendous equation.

    Bush, Cheney, and the NeoCons are Vatican operatives hell bent on impoverishing and indebting the USA. Looks like their plans have worked like a charm while the brain-dead American public remains deluded and addicted to money, religion, and politics. Who says you can't fool most of the people, most of the time...

    Pay close attention, profundity knocks at the door, listen for the key. Be Aware! Scoffing causes blindness...

    Humanity has long been deceived and deluded into thinking that money is a positive means to manage life, societies and civilizations. Chapter 2 of Revelations from the Apocalypse, Volume 1: Here is Wisdom thoroughly exposes the foundational deceptions associated with the concept of money and how it is actually a severe hardship on every aspect of life and every endeavor that must bear the burden of its unnecessary overhead and resulting stifling complexity. Money severely impedes the quality of life, society, and civilization by spawning myriad horrendous side effects (poverty, crime, wars, pollution, waste, greed, stress, etc.) which are all traced directly to its presence, purposeful shortage, and imposed requirement.

    Here's a real hot potato! Eat it up, digest it, and then feed it's bones to the hungry...

    Money was conceived millennia ago by the priesthood of ancient Babylon to subvert the resources and energies of entire populations for the benefit of a rich and powerful few. Chapter 2 further pierces the ages-old smoke and mirrors surrounding the scourge of money, banking and credit (usury) by exposing their core logic and common denominator math. It exposes the purposeful and well-sculpted math and logic trap imposed upon humanity by the Vatican, its ancient predecessors, and their secret-society cohorts.

    It is abundantly clear that imposing money upon the entire world and then forcing people to participate in usury, pay taxes, compounding interest on national debts, and then to struggle their lives away for the sake of money, is extortion and great injustice on a grand scale. To cause suffering and despair for profit on such a grand scale can only be described as abominably evil. The time has finally arrived to demand a full accounting from the Papacy, Vatican, and all of their cohorts and chief supporters. They have no right to cause such overwhelming despair and suffering for millennia. They have no right to deceive practically everyone on such a grand scale. Why do our national leaders conspire with them and participate in such great evil while pretending to serve the Creator? Why do people still have blind faith in such obvious deceivers and their deceptions while they continue perpetrating such widespread and horrendous evil and abominations?

    The time has come to wake-up and prove to these duplicitous scoundrels that you are only temporary marks and dupes.

    Money: The Greatest Lie Ever Told

    12:48 PM  
    Professor Anonymous Anonymous said...

    Seven Star Hand..

    Seven Star Hand,

    Striving for money (greed) is merely the logical extension of the evolutionary process. Greed combined with a developed brain has put homo sapien in the world's driver seat. We as a species dominate the planet far beyond any living thing that came before. If we weren't greedy we wouldn't be writing about it here; we would be a life form relegated to obscurity. Forget about the 'Creator', 'cuz there ain't any. Think of why we are destroying this planet, why we moil for oil, minerals, timber, water, and why we raze the oceans and the rain forests. It's because our DNA is programmed to do so. The tragedy is that the man-made religions of the world encourage this, and prevent us from realising that those (including Matt Simmons) warning of imminent disasters in energy and global warming, have a most urgent message (it may already be too late). Religion (through the 'bible') promotes the ideas that we are 'god's children', that we are masters of the earth, that ecological balance doesn't matter, that the earth and humans were created by god and seeded with flora and fauna for our exclusive ues. Religion and the arrogance of humanity go hand in hand. Gonna be some kind of futile prayin' going down when Simmons is proven right, or when sea levels rise another several feet.

    2:10 PM  
    Professor Blogger WHT said...

    Echoing anonymous, no need to expound on it much more than what is written in the above concise paragraph.

    Also, read what Stirling Newberry has to say on Babylonia in his BOPNews post today:

    6:42 PM  
    Professor Blogger StillWater said...

    Wow! Semi permanent make up has alot of uses! But did you know that a woman consumes over 4 to 9 lbs of lipstick in her lifetime! Here is the link that I found that shows all of the research:


    5:14 PM  

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