From: Robert J. Bradbury (bradbury@aeiveos.com)
Date: Wed May 14 2003 - 12:08:07 MDT
On Wed, 14 May 2003, Charles Hixson wrote:
> Mike Lorrey wrote:
>
> >But what is the cost of production? These figures usually are tied to a
> >fixed cost of production, what is recoverable at those costs. Is there
> >some cost range specified?
No -- I was simply looking at the "generally accepted" reserves and
dividing it by the maximum ever production capacity (i.e. when the
equipment was in the best shape, perhaps when the prices were highest,
etc.)
Since at least 2 of the 3 countries cited (Iraq & Russia) could
presumably be classified as 3rd world, the costs of exploration and
production of more oil are presumably fairly low (a few $/barrel)
unless, like Russia, one is dealing with an exhaustion of reserves.
Presumably Saudi Arabia isn't much different since they can import
cheap arab labor for the oil industry from less oil-rich arab states.
The numbers I've seen indicate that 10's of billions of $ may be
required to get Iraq's production back up in the 3 billion barrels/day
range (or even push it closer to the Saudi 7-8 bbl/day levels). But
that is still probably chump change compared to what was spent to
remove Saddam and/or what would be required to reinvigorate the
Russian oil industry.
> I'd be quite suspicious of cost estimates that were more than 5-10 years
> in the future. Remember the spike.
Yes Charles -- we know. But given the contraction of the VC industry over
the last 3 years (Y2K: $90B Y2002: $19B) and the mumblings I hear in the
VC industry that everyone has contracted their outlooks -- [they will fund
companies producing revenue *tomorrow*] -- the "spike" is in the swamp.
One only has to look at historic U.S. stagflation and/or current Japanese
deflationary trends to raise at least one eyebrow and wonder whether the
"spike" is on course or adrift in the ocean.
If you were aware of the bioterrorism risks that I'm aware of you would
realize that it doesn't take much hit to significantly derail whatever
path "the spike" is on.
As the saying goes -- it ain't over until the fat lady sings.
Robert
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