Heading Out

Seeking the winds that help to sail on Shakespeare's tide.

Sunday, March 13, 2005

Could this be us next year?

Not too long ago the United Kingdom was sitting on lots of oil and gas and had few energy worries. Oil supplies are now in decline over there and The Telegraph reports that stocks of natural gas, which were supposed to be more than adequate, are running out. Another cold spell and industries may have to start closing. It appears that this is in part because the UK is sending gas to Europe which has supply problems of its own, with the largest reserve being in Russia and only being enough for 18 days. (And if that happens one wonders what it will do to Tony Blair's re-election chances, given that there may be an election there at the beginning of May - perhaps he left it just a little too late ?)

And OPEC seems to be producing nearly flat out. the only countries apparently with additional reserves are Kuwait and Saudi Arabia. Kuwait, if my memory serves, has about 300,000 barrels in reserve and the Saudi reserve is meant to be about 1 million barrels a day (mbd), though of a heavy sour crude. Well if demand is rising at about 150,000 mbd a month we will have used up the Kuwaiti surplus by the beginning of June. That would mean that we will find out sometime this summer just how much real reserve the Saudi can actually put onto the market. And of course this does not take into consideration the declining production that is taking place in most oilfields around the world.

Of course I had forgotten that I had mentioned the 1.5 mbd reserve over 2 months ago, and in the meantime demand has continued to rise. Thus as Business Week points out, we are already down to a total reserve of less than 1 mbd. The world uses about 83 mbd to put this in context.

A story in Reuters tells me that I forgot that the UAE has the capacity to also increase production by about 200,000 bd or just over 1 months increase in demand. The big question as the article points out is Saudi Arabia, and for more information on that you might want to download the pdf files from Matt Simmons.


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