The black pill or the green pill, what’ll it be? Leonardo Maugeri, a former senior executive at Italy’s giant oil company ENI, says “peak oil” is nothing but a crazy fantasy.

First problem with that: Maugeri’s previous analyses show a rather unenviable track record. Coming up on this blog Monday July 7th in Part 2: a critique of Maugeri’s recent study by Olivier Rech, former developer of petroleum scenarios at the International Energy Agency. Promises to be a stinger!

in French

A new report on the future of world petroleum production has caused quite a stir on planet “peak-oil.” That includes those of us who are concerned about the future of (the thermo-mechanical industry and thus of economic) growth.

“Not to worry, folks!” seems to be the core message of the report, “…and you bankers and insurers needn’t listen to any nonsense warning that the petroleum business is an endangered species.”

Among others, The Wall Street Journal is lapping it up.

The report by ex-director of strategy at the Italian oil company ENI, Leonardo Maugeri, promises an unheard-of boost in world liquid fuel production by 2020: no less than an additional 17.6 Mbd (million barrels a day), a 20% increase over present production capacity. Leading to a “revolution” which would reverse a nearly 10-year-old trend. Maugeri gushes: “World production capacity is growing so fast that it could (…) lead to a glut of over-production and a steep dip in prices.”

This fab forecast will be methodically taken apart by French expert Olivier Rech in Part 2 but first let’s provide a little context.

The Maugeri report represents the fiercest charge to date in a sweeping counter-offensive initiated 10 months ago in The Wall Street Journal by Daniel Yergin, Vice-President of the powerful petroleum information agency IHS. In the peak oil debate, Yergin is considered to be a leader of the “optimists” camp – so says the economically very correct British weekly The Economist, whose own optimism appears to be flagging of late.

Yergin’s main arguments received a severe shaking, right here on Oil Man, at the hands of Frenchman Jean Laherrère, a key figure in the “pessimistic” camp and former head of oil exploration at the French company Total.

Big Oil finds itself in need of some encouragement, particularly since recognition by the International Energy Agency that conventional petroleum extraction (that’s 74 Mbd or 90% of total crude production) reached its historical peak in 2006. They went on to add that that figure would “never” rise again.

In March 1998, in a seminal article, Jean Laherrère and Colin Campbell, former Vice-President of Fina, correctly stated that this conventional oil peak would take place « before 2010 ».

It turns out that Leonardo Maugeri himself is an optimist of the … how shall we put it? … unrepentant variety. In a 2006 Forbes article he predicted a world production increase of “between 10 and 12 Mbd” by 2010. However, according to the figures from a British Petroleum study, production went from 81.7 Mbd in 2006 to 82.5 Mbd in 2010, an increase of only 800,000 barrels per day. Last year crude production reached 83.6 Mbd as Saudi Arabia pulled out all the stops.

Maugeri’s eager optimism lines up neatly with the analyses of Daniel Yergin’s IHS which, in 2005 for example, announced a world production increase of no less than 16 Mbd between 2004 and 2010. There again, way off the mark.

Among non-Opec oil-producing countries, total world liquid fuels rose by only 2 Mbd between 2005 and 2010 and that was due, not to crude oil production (which actually declined by 0.2 Mbd) but to the development of agro-fuels and Canadian tar sands. As for Opec, that is to say in large part Saudi Arabia, things are more complicated though far from bright and shiny in general.

Two final introductory remarks: Maugeri’s new report was published by the Harvard Kennedy School, where Daniel Yergin taught for a number of years ; and its main source of data is IHS.

What then, if anything, is really new enough in the Maugeri report to justify talk of a “revolution?” See Olivier Rech’s article on Monday, where he will present his critique while maintaining his own forecast (seen here in December, 2011) of a total liquid fuels peak sometime between 2015 and 2020.

(Olivier Rech manages Energy Funds Advisors, a company providing advice to investment funds for La Française AM).

Many thanks to James Anglin for the translation !