Chavez Frias deserves credit for initiatives to diversify the Venezuelan economy

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Wednesday, May 28, 2003 By: David Sheegog

Date: Wed, 28 May 2003 10:17:28 -0500 From: David Sheegog davidsheegog@hotmail.com To: Editor@VHeadline.com Subject: Oliver Campbell deserves credit

Dear Editor: Oliver Campbell deserves credit for giving credit to PDVSA for restoring production from Venezuela's oil fields ... his caution against listening too much to "experts" should also be taken to heart.

There is an iron law of petroleum production, however, that is missing from his article, and that is: peak of production follows peak of discovery.

That has happened already in the United States, where peak discovery was in 1939 and peak production in 1970.

Once a net exporter of petroleum, the US now imports 56% of its consumption.  Peak production has happened as well to three out of four of those which Campbell mentions ... the North Sea, Libya, and Prudoe Bay ... it will happen in Nigeria and Venezuela. Peak of world discovery was 1973. (Statistics are from the US Energy Information Agency)

The importance of this fact is that, if a major oil producing country, such as Venezuela, intends to have a vibrant economy after peak of oil production, planning for the eventual depletion of it's oil reserves is extremely important work for everyone: the government, the private business sector, and all other institutions and individuals that can contribute to a country's long range planning.

That work was not done ... still isn't being done in the US, with the result that this country is now, by far, the largest end-user (and waster) of petroleum in the world on an absolute and per-capita basis. We have an economy that is addicted to oil ... cheap oil ... and the "planning," if you can call it that, is to use our incredible military strength to insure that we keep getting it.

An immoral approach by most anyone's standards, and one not possible for the rest of the world.

The task before all of us in the developed and developing world is to envision the world without cheap oil. That world will have to look and function differently than the one we live in today.

Mr. Campbell, is right that improved recovery methods have made it possible cost-effectively to extend the life of many reservoirs. I witnessed that in my native Oklahoma; however, there are now more capped wells than producing wells here. When it takes more oil-produced energy to pump oil from a well than is recovered, then all the improved recovery in the universe can't make it cost-effective to remove that oil.

Energy economists refer to this as EROEI (energy-return-on-energy-invested).

The energy cost of deep sea production and other difficult extraction zones has already prohibited some of them from being developed. Another iron law of petroleum production is that the easiest and cheapest to produce fields will be developed first ... they have been already.

Venezuela, like the United States, has been fortunate to have abundant oil and gas resources. But those resources are finite. Whether the world has another 40 or 100 years of usable petroleum is less moot now than it was when the first predictions were "40 more years" as Mr. Campbell remembers. Improved science in geology, exploration, reservoir engineering, secondary recovery technology etc. have given us a much clearer picture of the world's petroleum reserves and how long they will last.

Peak world oil production will come within the next twenty years ... the depletion curves on any and all fields look much steeper in descent than production curves going up simply because we've become so much better at extraction, as Mr. Campbell points out.

With proper planning, the remaining oil could be made to last a very long time ... but that planning is mostly not being done, except in a handful of places, Denmark, Netherlands, Iceland, Cuba, that I am aware of.

• President Chavez Frias deserves credit for his initiatives to diversify the Venezuelan economy as well as for his efforts in restructuring PDVSA to enable it to get back most of it's lost production so quickly.

In the long, long haul the restructuring of Venezuela's economy to be more self-sufficient and energy efficient is the more important ... as it is for the whole world.

David Sheegog davidsheegog@hotmail.com Oklahoma, USA