Big beasts of the oil jungle don’t come much bigger than Rex Tillerson, in London last week to give a speech at Chatham House. Usually at such events the bigger the beast the duller the platitudes, but during questions afterwards the CEO of ExxonMobil made some significant remarks that underscored the tightness of oil supply outlook, and effectively predicted the end of non-OPEC oil production growth by 2010.

Asked about Iraq, Mr Tillerson said “We look forward to the day when we can partner with Iraq to develop that resource potential…As a business-person not a politician we hold out great hope in our prayers for Iraq to succeed as a nation”. This is no surprise since Iraq’s reserves are not only the world’s third largest, but also uniquely under-exploited. After years of war, sanctions and post-invasion butchery, Iraqi oil production still languishes below 2 million barrels per day, although its officially claimed reserves of 115 billion barrels could support output at perhaps three times that level. As the global peak of oil production approaches, no other country on the planet offers such potential, which is of course why it was invaded in the first place – although this has turned out to be a spectacular miscalculation. No wonder Iraq is in Mr Tillerson’s prayers, and those of his competitors.

On the subject of biofuels, the Exxon boss highlighted the absurdity of US plans to produce 35 billion gallons of corn-based ethanol, explaining that producing just 4.5bn gallons in 2006 had consumed 21% of the entire US corn crop. Do the math. To hit the 35bn gallon target using corn alone would take 140% of the US corn crop. So achieving the target depends on the development of cellulosic ethanol, which he characterised as being at the “laboratory experiment” stage with “significant hurdles to overcome”. Even once the problems had all been cracked, he said, on the basis of previous experience of new technologies it would take 12 to 16 years to scale up to commercial volumes.

Yet having neatly exposed some of the shortcomings of US biofuels, Mr Tillerson went on to make an odd remark: “Our industry is in no way threatened by the development of biofuels or alternatives. In fact we see the enormous challenges in front of us, and we’re concerned that we’re not going to be able to do it out of our traditional sources of energy. So we welcome them.” So having just argued that US biofuels are woefully inadequate as an alternative to crude oil, Mr Tillerson seemed to be saying America couldn’t do without them. What does that tell us?

ExxonMobil’s hostility to the idea of an early peak in global oil production is well known, so I knew better than to ask its CEO about that. But when I quizzed him about International Energy Agency (IEA) figures suggesting that non-OPEC oil production might already have peaked, I got the company line anyway: “We don’t do peak oil calculations, because the problem with the whole peak oil debate is that people have to assume they know how much is in the container in order to calculate the peak. And as we’ve learned over time, over the last 15 years, the estimates of what’s in the container, largely by governmental agencies, have gone up three times.” Unfortunately the company line is wrong on two counts.

Mr Tillerson is right to point out that global resource and reserve estimates have risen, but that does not mean that the higher estimates are correct. One of the most important of those he alluded to is the World Petroleum Assessment conducted by the United States Geological Survey (USGS) in 2000, which has already been shown to be wildly over-optimistic.

More fundamentally, Mr Tillerson’s contention that in order to forecast the peak you need to know in advance how much oil is ‘in the container’ – in other words, that the forecast relies on an accurate estimate of the total oil that will ever be produced – is wrong. True, M. King Hubbert’s earliest technique, back in the 1950s when he made his famous prediction that US output would peak in either 1965 or 1970, did rely on such industry estimates. But during the 1960s Hubbert was forced to develop a range of more sophisticated statistical approaches that did away with the need for an initial estimate, precisely because the USGS had started to produce absurdly inflated estimates, apparently with the intention of discrediting Hubbert and his forecast. With his later techniques Hubbert deduced the amount of oil that would ultimately be produced solely from observed discovery and production trends, and this in turn produced astonishingly accurate forecasts. When 1970 rolled around it was Hubbert who was proved right, and the USGS spectacularly wrong. Apparently Mr Tillerson has not yet read The Last Oil Shock, where I explain all this.

But I digress. The IEA forecasts that total non-OPEC oil production will amount to 50 million barrels per day in the second quarter of this year, against 50.6 mb/d in the same period in 2005. It was this that prompted my question about whether non-OPEC oil production might already be in terminal decline. While Exxon ‘doesn’t do’ peak forecasts, Mr Tillerson had this to say: “I think the ability to continue to grow volumes of non-OPEC production substantially is very challenging. So the question is more how long can you sustain with some modest growth, because we do in our outlook see some continued growth in non-OPEC in the near term, the next two to three years. So then the question is how long can the non-OPEC supply maintain a plateau so to speak, and that in some sense is a function of access to non-OPEC countries”.

Mr Tillerson insists that if access to resources improved – particularly to federal lands in the US, or in a more stable Russia – the situation could be transformed. But this hope looks folorn. A quick glance at the interactive oil depletion atlas shows how few countries have significant oil production growth potential, how even fewer are in the non-OPEC camp, and how fewer still are likely to offer the kind of access Mr Tillerson desires in this era of rising resource nationalism. So for all the caveats, the boss of the largest privately traded oil company in the world has effectively said non-OPEC supply growth is over by 2010.

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