Bakhtiari Says Oil Industry Hits Peak Production

ABC/Australia
July 11, 2006

MARK COLVIN: A leading expert has warned that the world's oil industry has started to reach its peak production rate and is already in the first phase of a transition to an uncertain future.

Dr Ali Samsam Bakhtiari predicted on this program two years ago that the crisis would begin in 2006 or 2007.

Now he says the current estimates of oil reserves are grossly exaggerated and we are approaching a time when oil may reach $US 300 a barrel and demand will out-strip supply.

It may happen this decade.

Barney Porter has the story.

BARNEY PORTER: Dr Ali Samsam Bakhtiari says in one regard, the science is simple.

ALI SAMSAM BAKHTIARI: Crude oil is the master domino. When you tumble crude oil, all the other dominoes tumble, whichever they are. And that is what makes this peak oil so important.

BARNEY PORTER: Dr Bakhtiari has recently retired as a senior advisor for the National Iranian Oil Company in Tehran and has written several books and more than 65 papers on the Iranian and international oil and gas industry.

In a speech in Sydney today, he said the oil industry had hit a peak production of 81 million barrels per day, which would decline to 55 million barrels per day up to 2020.

And Dr Bakhtiari says there's another, more immediate problem, for the industry.

He says the last great find was in the 1990s in the so-called 'frontier areas' which included Alaska, the North Sea, Brazil and deeper off-shore sites.

They've since been developed until there are now only two left: the Arctic Ocean, and Antarctica.

ALI SAMSAM BAKHTIARI: I hope that the oil industry will not go into Antarctica but, today I am not so sure, you know, because when the price will be $200 or $300 per barrel, then anything can happen.

BARNEY PORTER: Dr Bakhtiari says Russia's production actually peaked in 2004 and has since been in decline, which will have major ramifications for Europe. He claims the Russian industry officials won't admit the facts because they still want to attract investors.

Dr Bakhtiari says the latest finds by the industry will add only, at most, a few days to the world's reserves.

ALI SAMSAM BAKHTIARI: We are consuming, world-wide, 30 billion barrels of oil every year. It is an enormous amount. But what is the industry finding? It is finding something between four and six only.

So every year that passes, that we have passed in this century, we had a deficit on consumption versus finds.

BARNEY PORTER: As to the future, Dr Bakhtiari describes a stage he calls "Transition One" where change will be slow and gradual, a sort of business as usual, because of the world's ongoing addiction to oil.

But he also says there's an element of uncertainty because traditional laws of economics are changing. Dr Bahktiari says in theory, if the price of oil is doubled, the demand should go down.

But he notes in the past four years the price has actually tripled and demand is still increasing.

ALI SAMSAM BAKHTIARI: We are entering a brand new world, a world that is totally different. We are used to this growth and we have been addicted to this growth.

BARNEY PORTER: However in the few years left in his transition model, Dr Bakhtiari says Western Australia may be a model for the world with its approach to public transport, providing free buses and a light-rail system throughout the suburbs.

ALI SAMSAM BAKHTIARI: The more you would invest in public transport and in rail, it would be a benefit, but naturally it is going to be expensive first. But if you spend every dollar that you spend today, it's much better than the dollar that you are going to spend tomorrow.

MARK COLVIN: Dr Ali Samsam Bakhtiari ending that report by Barney Porter.

And in tonight's Four Corners on ABC TV, Jonathan Holmes will be examining the issue of Peak Oil, as it's called, in a program which took him to the Middle East, the US and Europe to interview the key protagonists. That's at 8