Wednesday 15th June 2005

THE MEGA-FIELD COUNT

Today, as we switch our focus from Governments, Gold and Money to the Global Energy Outlook, we hasten to remind our readers that, in tomorrow's world, energy and money will continue to be closely linked. Last week we quoted our Esteemed Swiss Banker saying, "while Gold is the King of Money, Oil is the King of Commodities.

For several years we have maintained the view that Energy (oil & gas) is set to become increasingly scarce and expensive in the years ahead. This will be a quantum change that is likely to have significant effects on the economy and potentially our way of life. 

Earlier today we were joined on a conference call by a smart oil and gas reserves engineer who made the comment, "Gentlemen, the more we look at the global reserves picture, the more alarming the prognosis becomes." 

The "alarming prognosis" referred to by our reserves engineer is not hysterical doomsday accounting, but simple supply/demand fundamentals. 

Doing a quick Mega-Field Count paints an interesting picture; 

1) A "Mega-field" is an Oil Field that has recoverable reserves of over 500 million barrels of oil during its lifetime. Usually a Mega-field has the potential to produce up to 100,000 barrels per day of oil. 

2) In 2005 the world consumes 1 billion barrels of oil every 11½ days. The world is consuming THIRTY (30) Mega Fields each year (this rate of consumption is growing each year). 

3) The rate of discovery of new Mega-fields nowhere near matches the rate of consumption of the same; 
In 2000 just 16 new Mega-Fields were discovered 
In 2001 only 8 new Mega-Fields were discovered
In 2002 only 3 new Mega-Fields were discovered 
In 2003 NO new Mega-Fields were discovered

4) The rate of new Mega-fields coming online nowhere near matches the rate of depletion of old and existing Mega-fields; 
In 2003 only 7 new Mega Fields were brought online 
In 2004 only 11 new Mega Fields were brought online
In 2005 only 18 new Mega Fields are coming online
In 2006 only 11 new Mega Fields are planned to come online
In 2007 only 3 new Mega Fields are planned to come online
In 2008 only 3 new Mega Fields are planned to come online

Globally we are consuming energy at a far quicker rate than we are discovering or bringing new reserves online. There is a lag rate of many years or even decades between discovering reserves and bringing them to the market. 

Since the late 1970's the western world has been living in an artificially low energy price environment, which has led to careless over-consumption of a commodity that is becoming increasingly scarce. 

What does it mean for us in the future? The fundamentals behind this highly political market seem to indicate that we will see energy becoming progressively more valuable and expensive in the days and years ahead. It has been said that times of great change are times of great opportunity. 

Best Regards 

Philip Judge
pjudge@anglofareast.com