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April 22, 2008

Has Russian Oil Production Peaked? Peak Oil

This is one of those stories that probably ought to be front page news all over the world. Oil production in Russia, the world's largest oil producer, declined in Q1 for the first time in a decade. WSJ, from last week:

Russian oil production, for years a vital source of new supplies for world markets, is showing signs of a slump, adding to uncertainties that have helped push oil prices to record highs.

Russian output fell for the first time in a decade in the first three months of this year, according to the International Energy Agency, which represents industrialized oil-consuming countries. It said Russian production averaged about 10 million barrels a day, a 1% drop from the first-quarter of 2007.

Declining production from the world's largest oil producer and one of its largest exporters puts further pressures on an already strained market and adds to the potential for higher prices for a global economy coping with a slowdown. Global production constraints -- along with surging demand, rising oil-field expenses and political instability in petroleum-rich regions -- already have sent oil to more than $110 a barrel from $30 in about four years. [...]

Industry watchers and Russian officials generally blame the country's production slowdown on a combination of weather and tight electricity supplies in some parts of the country. In a longer-term worry, they also point to aging Siberian fields that once fueled its production growth. [...]

The IEA predicts Russian oil production will resume growth this year. But it estimates an annual increase of only 0.8% over 2007, compared with an average 2.5% in the past three years and much faster growth before that.

Russia's energy ministry expects a rise of 1.8%. But earlier this month, Yuri Trutnev, the nation's natural-resources minister, said on Russian television that the country's full-year production may be lower than last year's.


Russia's stumbling production growth highlights a troubling reality: Despite soaring oil prices in the past five years, crude output from nations outside the Organization for Petroleum Exporting Countries has remained essentially flat since 2005, defying the normal link between high prices and increased production. [...]

The reasons for the non-OPEC plateau range from spiraling exploration costs to the increasingly remote climates where new oil pockets are being found. Also, many major sources are aging. Europe's North Sea, Alaska's Prudhoe Bay and Mexico's Cantarell field in the Gulf of Mexico have all seen declining output.

New oil pockets are being found in "increasingly remote climates" because that's all that's left. That's what peak oil looks like.

Various other news stories, like this one in the Financial Times, cite all sorts of temporary reasons why Russian output is slumping. But look at that graph. It looks like your basic Hubbert peak. Whether it is or not, time will tell.

As I write this, oil is at $118.35 a barrel.

Posted by Jonathan at April 22, 2008 04:54 PM  del.icio.us digg NewsVine Reddit YahooMyWeb

Comments

so glad you are back I have missed you mighty

Posted by: ynne Launius at April 23, 2008 12:03 AM

Ditto! Missed hearing from you. Hope you are doing well. Thinking of you with fondness --

Posted by: Trish at April 24, 2008 03:40 PM