ASPO-5 Day 1: Kjell Aleklett Takes on the IEA, EIA and USGS

Taking a page from George Bush’s State of the Union speech, ASPO President Kjell Aleklett told conference-goers that the world is addicted to oil and it’s “time to sober up.” He also took serious issue with the optimistic projections by big government energy agencies such as the IEA, EIA and the USGS, saying these bodies shouldn’t be allowed to publish what are clearly defective prognostications of robust future oil supplies.

Aleklett zeroed in on the problem by analyzing the need to pump up oil production to satisfy the growing needs of the oil-hungry US, Europe and China. “For every importer you need an exporter,” he said. “You need both sides of the equation."

So can the word’s top three exporters—Saudi Arabia, Russia, Norway—keep up? Citing trend data from the IEA, Aleklett said the world would need to increase imports by 30 million barrels per day by 2030. Yet there’s little hope of boosting production by even a fraction of that, he said.

The USGS says there’s lots out there—as much as 3.3 trillion barrels. “I don’t believe it,” Aleklett said. Indeed “it is irresponsible to publish these types of projections.” The USGS numbers fly in the face of reality, the professor at Sweden's Uppsala University said. “Discoveries have been declining since the 1960s and extrapolations point to the fact that there’s maybe 150 billion barrels left to find. That’s about all we can expect.”

The International Energy Agency is similarly guilty of wishful thinking, Aleklett told ASPO-5. The reason for IEA’s optimism is easy to understand: It derives from the skewed needs of the agency’s sponsors. “IEA is not an international agency at all,” he said. “It’s a political organization that should be called the ‘OECD Agency.’ It’s composed of the world’s richest countries and its reports fit the economic and political needs of these countries.”

Aleklett said that analysts with the IEA are obligated in public to stand behind the agency’s official reports, which say the world will consume—and be able to produce—about 121 million barrels per day by 2030. “This is not possible,” Aleklett said. “But over a cup of coffee, they something completely different.”

Aleklett said production of oil from deep waters "really forms the peak," but the falloff from these sources will be very steep. New production from the world's number one producer Saudia Arabia is also unlikely, with just five to six years left of growth possible, amounting to possible 2 million barrels per day of additional oil, if that. Number-two producer Russia “is also officially peaking now,” he said, and will fall further as a result of a growing domestic oil appetite. Number three Norway is also declining rapidly. “They will not be number three for long,” he said.

When you add it up, it’s obvious that by 2030 the world will be facing a gap of about 30 million barrels per day of export capacity.” He cited claims by the former Saudi oil production head Saddad al-Husseini that the world needs 10 new Saudi Arabia’s to make up for the shortfall. “Why don’t we listen to him,” he told the gathering.

What about the tar sands? Don’t count on it, Aleklett said. The best you can hope for is maybe five to six million barrels per day, but that will also require widespread deployment of nuclear plants to melt the asphalt-like tar into oil. “Those who say that tar sands can compensate for the decline of convential crude don’t know what they are talking about.”

Aleklett likened the gap between what the world needs what can be produced to the giant maw of a crocodile. “We’ve been inside the mouth for years and it’s about to clamp shut,” he said.