'Peak Oil' focus of Kentucky Oil & Gas meeting

Mammoth Resource Partners, Inc. President Dr. Roger L. Cory was the featured speaker at the November meeting of the Kentucky Oil & Gas Association with a dynamic powerpoint presentation on Peak Oil, a subject that has experienced an exponential growth in media coverage since Dr. Cory first began publicly speaking of it in 2001.

The term ‘peak oil’ was first coined by Dr. M. King Hubbert, whose prediction in 1956 that the United States’ oil production would peak in the early 1970s branded him a heretic. Instead he was proven a seer when his prediction came true in 1971 the year that this country reached its highest production of 11.1 million barrels per day. By 2003 U.S. production had declined to 7.8 million barrels per day.

The decline is not limited to the U.S., however. A 2004 British Petroleum graph depicting world oil production clearly indicates that every oil producing country other than OPEC and the former Soviet Union has already passed its peak. “There are five major countries left in the world that are net oil exporters,” Dr. Cory stated. “Every other country has to import oil.”

Worldwide oil production is based on giant fields such as the Ghawar field in Saudi Arabia. At one time the Ghawar field held one eighth the world’s known supply of oil. “Now they are approaching 67% of water cut and the oil is sour and very heavy, good for only fertilizer, plastics, rubber and the like.”

National Geographic a few months ago brought the issue square to the forefront with a frontpage headline: The End of Cheap Oil. The article explained that we’re not running out of oil. “What we’re running out of is easily accessible oil, the ‘low hanging fruit’. The higher crude prices are necessary, Dr. Cory believes, to fund the increased cost of extraction.

“The government has been giving us depletion allowances in oil and gas for a long time,” he continued. “What do you think a depletion allowance is? It’s an understanding that what you’re investing in is declining.”

Contrast that with oil consumption. Graphs supplied by world governments show clearly the steady growth in oil consumption, with the countries of the Middle East and Africa, Brazil, China and India displaying the sharpest upsurge in consumption. Increasing world consumption, however, is not balanced by new discoveries. Giant oil field discoveries peaked in the 1960s and have declined rapidly ever since.

Is reducing consumption the answer to a decline in oil production? “Wall Street is stuck on the belief that the marketplace will take care of the problem, that the rising price of crude oil will automatically diminish consumption. But they ignore the fact that over 80% of consumption is classified as necessary consumption.”

Adding to the dilemna is a fact brought out in the 1993 book The Prize: the Epic Quest for Oil, Money & Power by Pulitzer Prize winning author Daniel Yergin, Chairman of Cambridge Energy Research. Association. Yergin explores how oil is power.

Referring to the book Dr. Cory explained, “Our industrial revolution in the early 1990s was born out of our getting on top of the power of oil earlier than other countries, and the blessings that we had of great natural resources. Jevon’s Paradox teaches us that cutting back on oil usage would only work if every country cut back unilaterally. Is that likely to happen? No. That is the reason that no administration past or present, Democratic or Republican, has ever put forth a true oil or natural gas conservation program. We cannot cut back or we take a strategic step back from other forces around the world.”

Dr. Cory still sees great promise for oil and gas production in the Appalachian Basin, which stretches from New York into parts of Alabama. “The Appalachian Basin is prime territory for the smaller companies represented by KOGA because it is broken down into thousands of individual landowners. Major oil players are not going to go knocking door to door trying to lease mineral rights on just a few acres.

“In my opinion,” Cory stated, “the largest opportunity currently in North America exists right in our area.” While the Basin has been in production since the early 1800s, much of it lies unexplored. According to a recent report by the Interstate Oil & Gas Compact Commission, the basin still contains as much oil and gas reserves as has already been extracted.

In addition, Dr. Cory believes that an astounding opportunity for drillers in the Basin is the reopening of abandoned wells. In many instances these wells were capped only because of the low profit potential of years past. With crude hovering around sixty dollars a barrel, “a well doing just one barrel a day is now worth twenty thousand dollars!”

Mammoth Resource Partners uses their web site, www.mammothresource.com, as a vehicle to educate both the public and their investors on oil and gas issues with both original articles and links to other sites. As evidence to the company philosphy that “our partners and their needs are the most important consideration in every project we undertake,” a separate password protected site allows investing partners to follow the progress of their drilling project while providing a copy of the drill permit, GPS coordinates and satellite image of each drill site.