For How Long Will The World

For How Long Will The World’s Crude Oil Reserves Last ?

Sam Ejike Okoye

This year oil hit a record-high of over $40 a barrel, and Royal Dutch/Shell Group reportedly downgraded its reserves by 4.5 billion barrels. While consumers pay for perceived shortages at the pump, scientists and economists struggle to reach a consensus over "proven oil reserves," or how much oil one can realistically mine before recovery costs outstrip profits. Economist Leonardo Maugeri of Italian energy company Eni fired up the debate this May with an essay in the US Science journal that accused the "oil doomsters" of crying wolf. Chief among the pessimists is the Association for the Study of Peak Oil, a group of European scientists who estimate that maximum oil production around the globe will peak in 2008 as demand rises from developing economies such as China . "If you squeezed all the oil in Iraq into a single bottle, you could fill four glasses, with the world consuming one glass of oil each year," says physicist and ASPO president Kjell Aleklett. "We've consumed nine bottles since oil was discovered, and we have another 9 or 10 in the refrigerator. How many more are there? Some say five or six, but we say three."
Others believe (rather unrealistically!), like Maugeri, that the number of glasses is virtually limitless. John Felmy, chief economist at the American Petroleum Institute, argues that peak oil-production estimates are so far off that for all practical purposes we might as well act as if oil will flow forever. "Ever since oil was first harvested in the 1800s, people have said we'd run out of the stuff," Felmy says. In the 1880s a Standard Oil executive sold off shares in the company out of fear that its reserves were close to drying up. The Club of Rome, a non-profit global think tank, said in the 1970s that we'd hit peak oil in 2003. It didn't happen. If there is an end to the debate, advanced oil-recovery technologies will most likely find it. For example, a new seismic survey technique sends sound waves of varying

frequencies thousands of meters below ground. Microphones arrayed above ground record the reflected signals, and computer software models a three dimensional picture of possible oil hot spots or reserves. The surveys have now added a fourth dimension, creating a time-lapse simulation of fluid movements. Companies are also finding sophisticated ways to mine more oil from existing wells. Flexible, coiled-tube drills that carve out horizontal side paths are a marked improvement over conventional, rigid drills that move only straight down. Using such technology, companies hope to soon harvest 50 to 60 percent of oil from existing wells, up from today's 35 percent. Biotechnology is also keeping the black gold flowing. University of Alberta scientists are searching for micro organisms that could dilute viscous, hard-to-recover oil and make it flow more freely. "Technology can help push peak oil production further and further out," says Satish Pai, vice president of Oilfield Technologies (which consults for Schlumberger Limited) searching for micro organisms that could dilute viscous, hard-to-recover oil and make it flow more freely. According to him, “Technology can also help push peak oil production further and further out," But only time will tell if it's enough. However, the bottom line is that today, oil is not only an economic issue, it is an important political matter of geopolitical dimensions. Non-OPEC oil-producing countries are already nearing their peak production, leaving most of the remaining reserves in the politically unstable Middle East . Increasing tensions between Islam and the West are likely to further threaten the access of the advanced industrialized countries to cheap crude oil. Consequently, the issue of oil reserves may in the end turn out to be a moot point since its relevance will in the end be determined by the political and technological ease of access as well as constraints posed by the global requirement of nations to keep atmospheric pollution from fossil oil burning to a minimum within a very tight limit. Indeed, because of the imperatives of human survival, the use of fossil fuels may before too long be abandoned altogether in favour of alternative non-

fossil energy sources such as biomass (wood and agricultural waste), nuclear, hydropower, solar, wind, ocean, hydrogen and geothermal -- the so-called renewable energy sources. For oil producing developing countries like Nigeria which depend heavily on crude oil exports as major source of its national external revenues, the critical issue revolves around the need of the advanced industrialized countries for continued easy access to oil at relatively cheap but stable prices. So long as crude oil flows on those terms, earnings from oil exports are safe. But in the real world a lot of things could go wrong. With the Chinese economy growing at unprecedented rates, their future oil demand is bound to be on the increase. The oil production situation in Venezuela and Russia consequent upon the travails of Russian Yokos oil company as well as the uncertainties Mr Chavez’s presidency respectively, gives a lot of nerves to the international oil market traders, while the continued violence in Iraq would also add to further uncertainties in world oil price stability which may continue its upward trend up to $50 a barrel and possibly beyond. The crucial question then is how high can the oil price go in its present upward spiral before the world economy is driven into a severe depression? Put another way, how high would oil prices have to rise before mining costs begin to outstrip profits? What is evident, is that if the demand-supply equation of crude oil is not rationalised soon, something is bound to give sooner than later. Unfortunately, the problem is more political than economic .This means that unless the global economic, political and social inequities and injustices that fuel local and international conflicts are addressed mostly by the privileged, rich powerful or strong , be they individuals or nations, terrorism (local and/or global) which is the other face of inequities/injustices committed by man/nation against his fellow man/nation will be with mankind for a long time yet. Alas, as the Iraq war showed us, it is quite easy to win the relatively simple high technology military assault but to win the peace is a completely different ball game. What should be apparent by now is that there is an inescapable nexus between

political, social and economic justice on the one hand and national and even world economic development and peace on the other. In this context, the tensions in Nigeria ’s oil producing Niger Delta would not have arisen if the Nigerian political leaders would eschew selfish interests in favour of equity and social justice. But alas, the oil dichotomy dilemma in the sharing of Nigeria’s oil earnings is but part of a deeper political malaise arising from selfishness and lack of a political will to face up to the unavoidable issue of political restructuring of the huge polity called Nigeria. It seems that Nigerian political leaders are only willing to engage in meaningful dialogue only when the polity is driven to the brink of disintegration. through their own neglect Indeed, the unnecessary controversy of whether a national conference should be sovereign or not is nothing but a cop out and a sign of insincerity of our political leaders as all thinking Nigerians know that what is meant is that the conclusions of any such conference must be inviolable and must not be tampered with by the government of the day as has happened too often in the past. The tragedy of the situation is that President Obasanjo, who no doubt is sincere in his efforts to rescue Nigeria from the abyss rejected a golden opportunity to write his name in gold in Nigeria ’s history books. Indeed, if at the outset, he realised that his regime, though civilian would only be transitional to real democracy, and therefore instead of going after corruption as his number one priority had faced first the outstanding chronic issue of political restructuring of Nigeria, the stage would have been set for real democracy to take root in Nigeria. But, as an igbo proverb has it, before acquiring a sleeping mat, one must first secure a land or space to place it on. Thus inasmuch as NEEDS may well be an excellent economic reform program, in the end its effectiveness may be undermined if it is going to rest on an unstable political infrastructure such as obtains in Nigeria now.

At the end of the day, whatever becomes of Nigeria politically, the issue of what happens when our crude oil runs out is just as important and must be addressed. In this regard, whether

Nigeria ’s continued membership of OPEC is in the overall strategic national interest needs to be re-examined. We must therefore explore carefully whether the export constraints of OPEC would enable Nigeria to balance effectively a number of competing factors, such as world demand and stability of oil prices, against our urgent need to finance our extant development programs such as NEEDS. Whatever is the case, it is clear that while the gravy train of petrodollars is still in motion, Nigeria must not only maximise and manage prudently income from its oil reserves but must more importantly use its oil income to diversify and upgrade its economy. It is hoped that the Presidency, the Energy Commission, the Federal Ministry of Science and Technology, the National Assembly and the NNPC will all rise up to this imminent challenge.

Sam Okoye , a life fellow of the Nigerian Academy of Science and retired professor of physics writes from London .