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Oil Crunch -

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PART ONE

Dr Jonica Newby

How much do you think you could afford to pay for petrol? A dollar fifty a litre? Two dollars? Four
dollars?

NARRATION

In this special Catalyst investigation, we travel from Paris, to London, to the outer space like
world that is deep sea drilling...

Dr Jonica Newby

Five million dollar machine - don't want to crash it.

NARRATION

... to find out why so many industry insiders now say we'll soon look back on 2011 as the good old
days when fuel was cheap.

Dr Jonica Newby

Ok - let's put oil in context. It's so deeply embedded in our lives and economy, we don't even
notice it - but look how much oil it took to get me here.

Text:

- Paris return - 1,000 litres per person

- My new outfit: around 1.5 litres

- My Bifsteak and Frites: around 1.25 litres

Dr Jonica Newby

We use 88 million barrels of oil a day.

NARRATION

Oil price impacts everything, yet at some point, world oil production will peak - and then decline.

Five years ago, when I first reported on this, the idea world Peak Oil was soon was sort of laughed
at by the mainstream.

So I'm curious - what are people saying now? Which is why my first stop is here.

Dr Jonica Newby

This is the headquarters of the International Energy Agency. It puts together the forecasts on oil
production over the next 20 years - and it's the body many governments, including our own, look to
for accurate advice.

NARRATION

This multi- government agency is the voice of the mainstream. And I'm here to meet the man at the
top ...

.... who just 5 years ago was confidently saying oil production will rise to 120 million barrels a
day by 2030. But now?

Dr Fatih Birol

When we look at the oil markets the news is not very bright. We think that the crude oil production
has already peaked in 2006

NARRATION

Hang on - did you get that? Crude oil production for the world peaked in 2006.

Dr Fatih Birol

The existing fields are declining sharply in North sea, in United States, in Gulf of Mexico. Just
to stay where we are today we have to find four new Saudi Arabia's, this is a tall order.

NARRATION

OK - so what are their current projections, which include tar sands, natural gas liquids, all
additional sources of oil.

Dr Fatih Birol

We see the total oil production can increase up to ninety six million barrels per day in 2035. But
this is potential, nobody can guarantee me that the oil under the ground, especially in some key
Middle East producers will be developed and will be brought to the markets in a timely manner.

NARRATION

So - no overall Peak Oil in sight officially, but not the reassurance I was expecting, and frankly,
it sounds like he's not confident in his own graphs. Which is interesting, because a team of
Swedish scientists say they've proven the IEA projections have a fatal flaw.

Physicist Dr Kjell Aleklett is a founding member of the Association for the Study of Peak Oil, and
has published 20 papers on this issue.

Dr Kjell Aleklett

We agree on the fact there is a decline in existing oil field but the yet to developed and yet to
find is over estimated, it's wrong, it's completely wrong.

NARRATION

He's talking about this part - oil fields to be developed and yet to be discovered.

Dr Jonica Newby

So they're using as their figures an extraction rate of oil that's at least twice as high as
anything that's been historically done?

Dr Kjell Aleklett

For a region, yes.

Dr Jonica Newby

Wow.

NARRATION

When Dr Aleklett's team used the same raw data but plugged in oil flow rates closer to what's been
achieved historically they got this.

Dr Jonica Newby

So under this scenario, we're in Peak Oil already.

Dr Kjell Aleklett

We are in Peak Oil already, we have been within one year already.

NARRATION

So if Dr Aleklett's team is right and we are already bouncing around in Peak Oil, how come nobody
noticed?

Well, in 2008, we hit the Global Financial Crisis - coincidentally or not just as oil spiked at
$148 dollars a barrel. Recession dropped demand - and according to some gave us a false sense of
security.

Over to London - where these captains of industry are so concerned, they've formed a task force to
run their own analyses. While they don't think oil has peaked just yet - their big worry is the Oil
Crunch.

Sir Richard Branson

Let's not an oil crunch take us by surprise and be poorly prepared.

Dr Jeremy Leggett

The Oil Crunch is when global supply fails to meet demand and starts to drop, and arguably we fear,
starts to drop so fast that you'd almost call it a collapse.

Chris Skrebowski

All the calculations tell us that it, it's, it's going to be no later than 2014 and it could be as
early as 2013.

NARRATION

Currently, they're busy mulling over the fact the IEA's latest oil demand figures have just gone up
- driven by a surging China and India.

Chris Skrebowski

If that continues, then it brings the crisis, right forward.

Dr Jonica Newby

How soon before I can't really afford to fly from Australia?

Chris Skrebowski

Well get your flying in fairly quickly, shall we say.

NARRATION

Both Skrebowski's group and Aleklett's were once thought of as mavericks. But in the last five
years, more and more oil heavy hitters have swung toward this point of view.

Dr Jeremy Leggett

The head of Total has said we can't go much higher. The former chairman of Shell is very worried.

Dr Jonica Newby

So why can't we just find more oil?

PART TWO

NARRATION

In part one, we discovered the Oil Crunch may be imminent - and I posed the question - why can't we
just find more oil. To find out, we're off to the coalface - or is that oil face - here in
Louisiana's Gulf of Mexico - home to 3,000 oil and gas platforms.

Dr Jonica Newby

You know, I'd never thought much about where future oil was going to come from. Until the Deepwater
Horizon exploded.

NARRATION

On that day, a surge of gas erupted up the drill hole and ignited - killing 11 and unleashing one
of the world's worst oil spills.

Dr Jonica Newby

It literally sent shockwaves round the world. But what really had me baffled was - the pipe of the
well was only this big. How come it took 80 days to cap it?

NARRATION

Well, it turns out, off shore oil ain't what it used to be.

Dr Jonica Newby

Wow - look at this thing.

NARRATION

These are what run our ocean oil wells now - I'm visiting one of the world's largest manufacturers
of Remote Operated Vehicles.

Anthony Harwin

This thing's capable of three to four thousand metres.

Dr Jonica Newby

And we're drilling that deep now?

Anthony Harwin

Absolutely.

Dr Jonica Newby

It's not like sticking a pipe in the ground Texas and shouting I'm rich anymore, is it.

Anthony Harwin

No.

NARRATION

It's not even like the old days of the North Sea, where much shallower oil wells were serviced by
divers.

At these these depths, a human body would be crushed. The water is near freezing point, the gas and
oil coming out of the sea floor boiling.

Modern deepwater drilling is like mining on Mars - which is why in the BP disaster, it took vast
dedicated teams months to muster the technology to fix the problem remotely.

Yet, according to another key observer, our political leaders, economists, and captains of industry
haven't really cottoned on.

Professor Robert Bea

The technology has changed so dramatically that some of our thinking is several decades behind.

For many people they can't see the hazards. It's called risk habituation, you get used to the risk,
you don't see it and it continues to go through what we call risk creep, and if you don't recognise
it, it can kill you.

NARRATION

Well they've recognised it now. And post BP spill saw a rush to regulate.

Dr Jeremy Leggett

What the industry task force fears is that this setback in deep water oil production will delay the
production from fields that have already been discovered in deep water. So that will have the
effect of bringing forward the inevitability of the peak.

NARRATION

Here's the point. These are the IEA projections that show our supply of oil growing slightly. Deep
water is where one third of all oil to be discovered or developed is supposed to come from.

And while we've focussed on deep water oil, similar problems are true of other putative crude
replacements. Take tar sands.

Dr Kjell Aleklett

The big fraction now is so deep so you need to boil water and inject steam into the ground to
soften it up and get it out, you know. To do that in the future you need to build nuclear power
plants, just to boil water and inject that into the ground and the Canadians are doing this now.

Dr Jonica Newby

So it's not going to come and save us, tar sands?

Dr Kjell Aleklett

Oh no, no, no, no. It may, might be it save Canada.

NARRATION

The trends are a clear measure of our desperation for new oil.

Professor Robert Bea

We've got this rush, this push to develop these very hazardous reservoirs and the industry is
starting to scare even me.

NARRATION

For final comment, I'd like to return to that former bastion of "she'll be right, we've got plenty
oil," - the International Energy Agency ...

... whose graphs officially show a gentle rise in oil supply over the next 20 years.

Dr Fatih Birol

The time is running out, the oil is today our lifeline, it is everywhere in the economy, if the
prices go up or if there's a supply disruption this will be definitely very bad news.

Dr Jonica Newby

How urgent is this?

Dr Fatih Birol

I think it would have been better if the governments have started to work on it at least ten years
ago.

NARRATION

Houston - it's just possible we have a problem.

Topics: Others

Reporter: Dr Jonica Newby

Producer: Dr Jonica Newby

Researcher: Dr Jonica Newby

Camera: Larry Neukum

Bob Perrin

Scott Munro

Andrew Burch

Sound: Jack Morris

Carlos Valladares

Rob Eade

Chris Nilsen

Editor: Lile Judickas

Story Contacts

Dr Fatih Birol

Chief Economist and Head of the Economic Analysis Division of the Paris-based International Energy
Agency.

Professor Kjell Aleklett

President, Association for the study of Peak Oil and Gas. Professor of Physics, Global Energy
Systems Group, Uppsala University.

Dr Jeremy Leggett

Executive Chairman of Solar Century, a renewable energy company in Britain. A Geologist who
formally worked in the oil industry.

Chris Skrebowski

Founding Director of Peak Oil Consulting and the Consulting Editor of Petroleum Review.

Professor Robert Bea

University of California, Berkeley, Dept of Civil and Environmental Engineering. Expert in offshore
platforms, pipelines and floating facilities.

Related Info

International Energy Agency

UK Industry Taskforce on Peak Oil and Energy Security (ITPOES)

Prof Kjell Aleklett