Christophe de Margerie has a reputation for forthright views and blunt speaking, but this week the chief executive of Total excelled himself by dismissing the IEA’s oil production forecasts as unrealistic, while coining an aphorism worthy of Donald Rumsfeld.
In his keynote speech to the Oil and Money conference on Wednesday, de Margerie suggested that the International Energy Agency’s ‘alternative scenario’, in which oil production grows to 103 million barrels per day in 2030, was in fact an “optimistic” scenario - meaning output was unlikely to reach that level. By implication the IEA’s ‘reference’ or business-as-usual scenario, in which output is forecast to soar to 116 mb/d in 2030, is even more far-fetched.
The alternative scenario is 13 mb/d lower than the reference case because it assumes that governments will introduce effective policies to fight climate change. But de Margerie explained - in answer to a question from lastoilshock.com - that oil production was unlikely ever to reach that level not because of policy intervention, but due to a combination of gepolitics and geology.
De Margerie said that the quality of oilfields now being exploited was worsening, and that this would restrict the rate at which oil could be produced. “Definitely we have been - all of us - too optimistic about the geology, not in terms of reserves, but in terms of how to develop those reserves, how much time it takes, how much realistically do you need.” There had also been a false assumption that North Sea-style recovery factors could be achieved everywhere, said de Margerie: “Not true; it doesn’t work”.
On geopolitics, he cited what might be described as the great ‘known unknowns’ of the oil industry: Iraq, Venezuela and Nigeria. If you knew when production in those countries would rise, he suggested, you might have an idea of what level of global oil production to expect.
Then came his own Rumsfeldian flourish: “But the fact that you don’t have the answer gives you the answer – ie. 100 [mb/d] is difficult because in the 100 you have already additional production in Iraq, you have additional production in Venezuela, you have additional production in Nigeria, you have additional production everywhere, and today we know those developments are not under way.”
De Margerie claimed these were not only his views, but widespread in the industry, or at least “the view of those who like to speak clearly, honestly, and not just trying to please people.” On Tuesday Shokri Ghanem, head of Libya’s National Oil Company, also told the conference that the world was unlikely to produce more than 100 mb/d, while Sadad al-Huseini, former head of exploration and production for Saudi Aramco, presented an analysis showing that global oil production has already hit a plateau and would scarcely rise above current levels. Last year Thierry Desmarest, de Margerie’s predecessor and now chairman of Total, made a speech in Paris claiming oil production would peak by 2020, and urging governments to find ways to suppress demand growth to put off the date of peak.
It is not clear what IEA chief economist Fatih Birol, sitting in the front row of the audience, made of de Margerie’s remarks. But it seems the Agency may also be suffering some doubts about its forecasts. Next year it will review its reliance on resource estimates from the United States Geological Survey, as reported exclusively by lastoilshock.com.