ExxonMobil - $12 Billion/Year On E&P, Production Now Flat For 5 Years

[hatrack]

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The prospects for long bets look a whole lot better at $34, which is where the five-year-out futures contracts are settling. “There's plenty of oil, but the costs of developing major new reserves in hard-to-get-to places are 100 percent higher than a decade ago,” says analyst George Gaspar at Robert W. Baird. “High price is the incentive for these guys to step up to the plate.” At the right price, there is a lot of oil. The Department of Energy estimates the amount of fluid hydrocarbons remaining in the Earth's crust is the equivalent of 7.6 trillion barrels of oil. That figure includes natural gas and tar sands. It's enough oil and gas to last 170 years.

Until the spike in prices, the Big Five were spending $47 billion a year on exploration and production — and getting less and less per dollar spent. ExxonMobil, the colossus among titans, shells out $12 billion a year on E&P and hasn't been able to grow beyond 4.2 million barrels a day for five years. At the bottom of the heap, ChevronTexaco of San Ramon, Calif. will invest $6.4 billion this year, but will still suffer a 4 percent decline in production. “I do worry about supply,” says David O'Reilly, ChevronTexaco's chief executive. “I see upward pressure on demand in an economically developing world.” In China — at 6.3 million barrels a day now the second-largest consumer of oil on the planet after the U.S. — energy use will probably double by 2020, says O'Reilly. Worldwide energy demand, driven by the population growth and industrialization of the developing world, will expand by 40 percent in the next 20 years.

How to meet that demand? The industry will enjoy estimated net income of $137 billion this year, up from $46 billion five years ago, according to Herold. The producers can easily, even after distributing $80 billion in dividends and share buybacks, afford the anticipated capital spending of $180 billion in each of the next two years. Tectonic shifts are already under way in their portfolios as they move out of declining fields in North America and the North Sea and push deeper into new regions with new technologies.

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ChevronTexaco drilled the deepest well ever last November, in the Gulf of Mexico's Alaminos Canyon area. It was the first well thrusting past more than 10,000 feet of water. After positioning the drill head at the seafloor, the Discoverer Deep Seas bored a hole another 4 miles down into the Earth at a cost of more than $50 million. The ship must stay perfectly still while drilling and does so using six thrusters with 15-foot-diameter propellers that can rotate 360 degrees. Linked to GPS devices and sonar positioning beacons on the seafloor, the thrusters can keep the ship in a steady position even in 95mph winds. To power the thrusters and drilling equipment, the ship generates 37 megawatts of power, enough for a city of 35,000. At that depth, a key piece of equipment is the blowout preventer, which weighs up to 300 tons and caps the well, holding back ultrapressurized (15,000 pounds per square inch) oil deep in the Earth. The Toledo prospect, as it is known, was thought to hold as much as 200 million barrels of oil before it was drilled, and ChevronTexaco hoped to pair it with nearby discoveries by Shell and Unocal and build a shared production platform. But record-setting Toledo turned out to be a costly dry hole, illustrating the fact that even in these days of space-age 3-D seismic studies, wildcatting is still a risky business."

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http://www.msnbc.msn.com/id/6184705

[el_gato]

1. Tar Sands are not Viable

I have yet to see any proof that tar sands can be exploited.

[phantom power]

2. Opinions seem to differ

Some say that EROEI is positive, which means viability is purely a matter of economics. But I've also heard claims that it's negative, in which case it's not viable under any circumstances.

Increasing demand and improving technology are likely to push it in the direction of viability, regardless.

The whole "tar-sands" thing seems to get used a lot as a rhetorical placebo. Just a way to end these articles on a pseudo-positive note. "It will all work out OK, we've got the tar-sands!" Even if we can use them, it will be more expensive, and people prefer not to think about the implications of that.

[hatrack]

3. They are being exploited as we speak - for how much longer, who knows?

The Athabascan deposits are the center of the one of the biggest industrial enterprises on the continent, and the target of billions of dollars in investment which only now, after about 15 years, is starting to turn a profit.

The long-term prospects for tar sands (setting EROI aside for the moment) depend largely upon two feedstocks - gas and water - and upon the price and availability of both. The tar sand operations have used the closest and easiest gas deposits and will in future have to look farther afield for more supplies.

As for water, the Peace and Athabascan rivers are already subject to substantial diversions for tar recovery - how much more will be available, especially with glaciers and mountain snowpacks likely to shrink in the Canadian interior, is questionable.