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A growing number of oil-industry chieftains are endorsing an idea long 
  deemed fringe: The world is approaching a practical limit to the number
  of barrels of crude oil that can be pumped every day.                 
  Some predict that, despite the world's fast-growing thirst for oil,    
  producers could hit that ceiling as soon as 2012. This rough limit -- 
  which two senior industry officials recently pegged at about 100       
  million barrels a day -- is well short of global demand projections    
  over the next few decades. Current production is about 85 million     
  barrels a day.                                                         
  The world certainly won't run out of oil any time soon. And plenty of 
  energy experts expect sky-high prices to hasten the development of     
  alternative fuels and improve energy efficiency. But evidence is       
  mounting that crude-oil production may plateau before those innovations
  arrive on a large scale. That could set the stage for a period marked 
  by energy shortages, high prices and bare-knuckled competition for     
  fuel.                                                                 
  The current debate represents a significant twist on an older,         
  often-derided notion known as the peak-oil theory. Traditional peak-oil
  theorists, many of whom are industry outsiders or retired geologists, 
  have argued that global oil production will soon peak and enter an     
  irreversible decline because nearly half the available oil in the world
  has been pumped. They've been proved wrong so often that their theory 
  has become debased.                                                   
  The new adherents -- who range from senior Western oil-company         
  executives to current and former officials of the major world exporting
  countries -- don't believe the global oil tank is at the half-empty    
  point. But they share the belief that a global production ceiling is    
  coming for other reasons: restricted access to oil fields, spiraling    
  costs and increasingly complex oil-field geology. This will create a    
  global production plateau, not a peak, they contend, with oil output    
  remaining relatively constant rather than rising or falling.           
  The emergence of a production ceiling would mark a monumental shift in 
  the energy world. Oil production has averaged a 2.3% annual growth rate
  since 1965, according to statistics compiled by British oil giant BP    
  PLC. This expanding pool of oil, most of it priced cheaply by today's 
  standards, fueled the post-World War II global economic expansion.     
  On Oct. 31, Christophe de Margerie, the chief executive of French oil 
  company Total SA, jolted attendees at a London conference by openly    
  labeling production forecasts of the International Energy Agency, the 
  sober-minded energy watchdog for industrialized nations, as           
  unrealistic. The IEA projects production will grow to between 102.3    
  million and 120 million barrels a day by 2030. Mr. de Margerie said    
  production by 2030 of even 100 million barrels a day will be           
  "difficult."This is "the view of those who like to speak clearly, honestly, and    
  [are] not just trying to please people," he bluntly declared. The     
  French executive said many existing oil fields are being depleted at    
  rates that will damage their geologic structures, which will limit     
  future output more than most people allow. What's more, some nations    
  endowed with large untapped pools of oil are generating so much revenue
  from their current production that they feel they don't need to further
  develop their fields, thus putting another cap on output.             
   Earlier this month, James Mulva, the chief executive of ConocoPhillips,
  echoed those conclusions in a speech at a Wall Street conference: "I    
  don't think we are going to see the supply going over 100 million     
  barrels a day.... Where is all that going to come from?" He questioned 
  whether the industry has enough support services and people to execute 
  projects to add that much oil production.                             
  Even some officials from member states of the Organization of Petroleum
  Exporting Countries, which has long insisted on its ability to supply 
  the world with fuel for decades hence, are breaking ranks and         
  forecasting limits. The chairman of Libya National Oil Corp. said at    
  the same London conference the world will have difficulty producing    
  more than 100 million barrels a day.                                   
  A former head of exploration and production at Saudi Arabia's national 
  oil company, Sadad Ibrahim Al Husseini, has also gone public with     
  doubts. He said in London last month that he didn't believe there were 
  enough engineers or equipment to ramp up production fast enough to keep
  up with the thirsty global economy. What's more, he said, new         
  discoveries are tending to be smaller and more complex to develop.     
  Many leaders of the industry still dismiss the idea that there is reason to worry

  I am no subscriber to the theory that oil supplies have already peaked," said 
  BP's chief executive, Tony Hayward, earlier this month in a speech in 
  Houston.                                                               
  Exxon Mobil Corp. Chief Executive Rex Tillerson has said that if       
  companies had better access to the world's oil reserves, production    
  would increase and prices would go down. "Sufficient hydrocarbon       
  resources exist to play their role in meeting this growing global     
  demand, if industry is allowed to access them," he said in a speech    
  this month. If access were granted, Exxon Mobil believes the industry 
  would be able to raise fuel production to meet demand in 2030 of 116    
  million barrels a day.                                                 
  The oil industry has long been beset by doom-and-gloom scenarios, which
  so far haven't panned out. "The entire oil industry in the late 1970s 
  was convinced the price [of oil] would be $100 by 1990 and we would    
  need huge oil shale mines" to exploit oil locked away tightly in rock, 
  says Michael C. Lynch, president of Strategic Energy & Economic       
  Research Inc. Of course, that didn't happen, as discoveries ushered in 
  new eras of low-priced oil in the mid-1980s through the late 1990s.    
  U.S. government experts are optimistic -- to a point. The Energy       
  Information Administration, the data arm of the Energy Department,     
  forecasts world oil production will hit 118 million barrels a day by    
  2030. But the agency warns that its prediction might not pan out if    
  resource-rich nations such as Venezuela and Iraq don't invest enough in
  their operations.                                                     
  "We know that the world is not running out of energy resources, but    
  nonetheless, above-ground risks like resource nationalism, limited     
  access and infrastructure constraints may make it feel like peak oil    
  just the same, by limiting production to something far less than what 
  is required," said Clay Sell, deputy secretary of energy, in a speech 
  in October. Resource nationalism refers to tightening state control of 
  oil fields to achieve political aims, often by restricting outsiders' 
  ability to develop the oil for world markets.                         
  Two or three years ago, it was far more common for oil analysts and    
  officials to trumpet the potential of new technology to harvest more    
  oil. In a report last year, Cambridge Energy Research Associates, a    
  prominent adviser to energy companies, made the comforting prediction 
  that oil production could reach 110 million barrels a day by 2015, and 
  "more than meet any reasonable high growth rate demand scenario we can 
  envisage" up to that date. Because of progress being made in extracting
  oil through new methods, CERA said it found "no evidence" there would 
  be a peak in oil flows "any time soon." In a later report, CERA said    
  world oil production won't peak before 2030 and that even when it does,
  production will resemble an "undulating plateau" for one or more       
  decades before declining gradually.                                   
  Oil companies have seen several years of bull-market prices, and thus 
  of trying to produce more. This has given their executives a better    
  sense of what is and isn't possible.                                   
  One limit: Many people think most of the world's giant fields already 
  have been discovered. By 1970, oil-industry explorers had discovered 10
  giants that could each produce more than 600,000 barrels a day,       
  according to Matt Simmons, chairman of energy investment banking firm 
  Simmons & Co. International. Exploration in the next 20 years, to 1990,
  yielded only two. Since 1990, despite billions in new spending, the    
  industry has found only one field with the potential to top 500,000    
  barrels a day, Kazakhstan's Kashagan field in the Caspian Sea. And Mr. 
  Simmons notes it is proving expensive and difficult to extract.        

  Big strikes are still possible. This month, Petroleo Brasileiro SA     
  announced a deep-water find off Brazil's Atlantic coast that appears to
  be the largest discovery since Kashagan.                               
  But some of the most promising geological formations are in locations 
  that are inhospitable, for reasons of geography or, especially,       
  politics and strife. Output from Iraq's rich fields is unlikely to grow
  much until security improves and outside investment returns. The future
  of Iranian and Nigerian production is likewise clouded by geopolitical 
  and local instability.                                                 
  Labor and construction bottlenecks also are making it difficult to     
  develop proven fields. One of the largest obstacles is the booming     
  commodity markets themselves: The prices of raw materials used in     
  oil-field platforms and equipment has escalated. And during the years 
  of low or moderate oil prices in the 1980s and 1990s, companies didn't 
  develop enough geologists and other skilled workers to supply today's 
  needs. "Years of underinvestment in new talent have led to a limited    
  and aging pool of skilled workers," noted Andrew Gould, the CEO of     
  oil-service giant Schlumberger Ltd., last month.                       
  High oil prices have also led to steep cost inflation for drilling rigs
  and other equipment. Costs have soared so much that the industry is    
  falling behind in the investment needed to sate expected future demand.
  To meet demand forecasts of 90 million barrels of oil a day in 2010,    
  the industry needed to have spent $350 billion on drilling and         
  producing in 2005, argues Larry G. Chorn, chief economist of Platts,    
  the energy and commodities-information division of McGraw-Hill Cos. But
  the International Energy Agency estimates that spending on oil-field    
  production in 2005 came to only about $225 billion, he says.           
  A failure to spend enough in the past few years "may have already put 
  the industry behind the spending curve," Mr. Chorn says. As a result, 
  he predicts "temporary shortages over several years, causing           
  debilitating price spikes."                                           
  Compounding the problem: Most of the world's biggest fields are aging, 
  and production at them is declining rapidly. So, just to keep global    
  production at current levels, the industry needs to add new production 
  of at least four million daily barrels, every year. That need is       
  roughly five times the daily production of Alaska, with its big Prudhoe
  Bay field -- and it doesn't assume any demand growth at all.            
  Mr. Simmons scoffs at estimates that production from proven fields will
  decline only 4.5% a year. He thinks a more realistic rate of decline is
  8% to 10% a year, especially because modern technology actually       
  succeeds in depleting fields faster.                                   
  If he's right, the industry needs to add new daily production of at    
  least eight million barrels -- 10 times current Alaskan production -- 
  just to stay even.                                                     
  Mr. Simmons thinks the world needs to shift its energy focus from     
  climate change to more immediate concerns. "Peak oil is likely already 
  a crisis that we don't know about. At the furthest out, it will be a    
  crisis in 2008 to 2012. Global warming, if real, will not be a problem 
  for 50 to 100 years," he says.                                         
  Oil executives who believe a production ceiling is coming are making    
  plans to stay relevant in a world where oil production is constrained. 
  Mr. de Margerie said at Total's annual meeting this spring that the    
  company was "looking into" nuclear-industry investments and had hired 
  nuclear experts to help make strategic decisions. ConocoPhillips       
  recently said it was considering building a commercial-scale plant to 
  turn plentiful U.S. coal into natural gas.                             
  Soaring energy prices have breathed new life into projects targeting    
  "nonconventional" oil, such as that trapped in sand or shale. But these
  sources can't be tapped nearly as quickly or inexpensively as the big 
  oil finds of the past.                                                 
  Canada's massive oil-sands deposits, which hold the largest oil       
  reserves after Saudi Arabia's, offer a vivid example. They contain an 
  estimated 180 billion barrels of oil. But after years of intensive     
  development and tens of billions of dollars of investments, the sands 
  are producing only a little more than 1.1 million barrels of crude a    
  day. That's projected to reach three million a day by 2015. The oil    
  deposits are so heavy that companies must either mine them or slowly    
  steam them underground to get the oil to flow out of the sand.         
  Randy Udall, co-founder of the U.S. chapter of the Association for the 
  Study of Peak Oil and Gas, has written that these unconventional oil    
  supplies are like having $100 million in the bank, but "being forbidden
  to withdraw more than $100,000 per year. You are rich, sort of."       
  As these uncertainties mount, there is growing hope that Saudi Arabia, 
  which has about 20% of the world's oil reserves, would ride to the     
  rescue if needed. Saudi Aramco, the national oil company, has embarked 
  on an ambitious plan to increase its daily production by 30%, or three 
  million barrels, early next decade, and thus reclaim the title of top 
  producer from Russia. But Mr. Al Husseini, the former Saudi oil       
  executive, now an independent consultant, said others aren't doing as 
  much, leaving the world entirely dependent on Saudi Arabia to provide 
  extra capacity.                                                       
  "Everyone thinks that Saudi Arabia will pull us out of this mess. Saudi
  Arabia is doing all it can," he says in an interview. "But what it is 
  doing, in the long run, won't be enough."                             

 
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