Monday, February 21, 2005

Urban Survival and Oil

George Ure at Urban Survival has a post on his web site called, "Peak Oil For Real?". You'll have to search on the phrase, as he does a rolling blog. His daily update is informative and a lot of fun, just pack your tinfoil hat. All skepticism aside, my take on him is that of a practical person who is perfectly willing to entertain non-orthodox models of reality - which I think still describes peak oil. Maybe he just reminds me of my grandfather, a rocket scientist who had a bookshelf loaded up with tomes discussing Atlantean civilization and UFO's. (What is it with hard scientists who go on mystic benders? Did Godel spike the punch?)

Anyways, Mr Ure recieved a letter from an unamed oil exec shortly thereafter, from which I will reproduce portions with data I was previously unaware of. For the full letter, follow the link.

1) We are drilling rig limited – we are at full capacity world wide in the offshore rig market, and even the small number of new drilling rigs they are building will not improve that appreciably. No drilling contractor is going to build rigs rapidly ever again – not after the disaster of cheap oil in the late ‘70’s and ‘80’s. Assuming oil jumped to $100/bbl tomorrow, little in our industry would change, because the drilling infrastructure has been cannibalized for 20 years…..we are already drilling as fast as we can!


6) For the most part, the biggest fields have been discovered world wide. What remains is technologically prohibitive (water depth, downhole temperature or sheer depth of the deposit). We are all fighting for the scraps as things exist today, with the exception of the African coast. There, we are fighting for our lives as well as oil. I have personally been shot at during overseas stints, and once held hostage by guerillas as they blew up our rig while we watched. We are not a bunch of sissy-boys in this industry, but we also have wives and children.


Some numbers for the number bunch to crunch: The average offshore rig cost $24,000 per day to rent in 2003, and today the same 30 year-old-rig costs $40,000 per day to rent due to rig availability. Yes, most of our rigs are 30 or more years old – would you rent a cabin on a 30 year-old cruise ship? Yet this is what we drill oil wells with in the new millennium…..

Multiply that times the average 45 days to drill a “second tier” oil or gas well, you get $1,800,000 just for renting the drilling rig! No other mining industry or industry I know of has such tremendous up-front costs. The average price for a typical offshore well is around 3.7-4 million dollars. A production platform to bring the oil to is easily in excess of $10 million…….and these prices will escalate with energy costs!


Just wanted to get that off my chest. I have been maligned and spit on by too many people who drive cars and use electricity, and then bitch about prices or claim some kind of “Big Oil Conspiracy”…. I can tell you that the collective consensus within my business will be “let the bastards freeze in the dark” when the big wail arises.


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