Matt Simmons: Oil Firms 'In Liquidation

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Simmons' assessment of major oil companies' fate is the "grim reality," he says, of the firms even as they insist that vast potential remains from unconventional sources. Among those untapped reserves are the "tar sands" or "oil sands" of Canada — naturally occurring mixtures of earth, water and oil found largely in Alberta.

Simmons said it's "convenient" for major oil firms like Shell to book reserves, such as its oil sands project in Alberta, but doing so amounts to an exercise in “turning gold into lead” because of the vast energy and potable water resources needed there to produce low-quality oil.

The water is converted to steam to blow oil from the sands and then to melt the tar, but this still leaves low-quality oil that is later mixed with higher quality oil to finally yield synthetic crude.

The cost of Shell’s Canada oil sands project has now ballooned to $14 billion but would yield only 100,000 barrels per day — about the same as a single major well in Saudi Arabia — making it an unsure business proposition, Simmons said.

His critique is not limited to Shell though. All major oil firms, he said, are "overlooking the fact that they are actually in liquidation, their production has been in decline for several years [and] no matter how much money they intend to spend, they just can’t get ahead of their [production] decline curves. And their proven reserves are shrinking very rapidly.”