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CALGARY HERALD: ‘Era of cheap energy is over,’ says Buckee

SHAUN POLCZER

Global oil production has peaked and will soon decline resulting in higher prices for consumers, Talisman Energy Inc. CEO Jim Buckee said Wednesday.

“I believe we’re already here (at the peak),” Buckee said at the company’s annual meeting in Calgary. “I think it’s fair to say the era of cheap energy is over.”

In 1956, Shell geologist Marion King Hubbert correctly predicted that United States production would peak in 1970. Buckee received a doctorate in astrophysics from Oxford that same year.

Since then, so-called “peakists” have used Hubbert’s theory to predict global oil output will crest sometime around 2010.

That view is shared by Texas oilman T. Boone Pickens, who predicted world oil production would top out around 84 million barrels a day (bpd) even though the U.S. government’s Energy Information Agency sees it rising to 118 million bpd by 2030.

According to the BP Statistical Review of world energy, planet Earth pumped 81.1 million bpd in 2005 (the most recent year available), up about one per cent from 2004.

Buckee said the vast majority of the current total comes from fields discovered almost half a century ago.

Rather than a dramatic falloff in production, he foresees a “gradual” plateau with demand “rationed” by higher prices.

When pressed to explain what that means for Talisman’s shareholders, Buckee described the scenario as “constructive . . . it means the price of oil goes up.”

Buckee has gained a contrarian reputation for steering Talisman away from oilsands, the East Coast and shallow gas — which he continued to insist are “uneconomic.”

PEAK: Controversial

Yet, peak oil theory remains a controversial topic in industry circles, where it is given the same regard as Elvis sightings and Bigfoot.

But Peter Tertzakian, chief economist with Calgary-based ARC Financial Corporation in Calgary and author of the bestselling book A Thousand Barrels a Second, said Buckee is generally correct — with important caveats.

The rush to develop Alberta’s oilsands is “simple” validation, he said.

“It depends on what kind of oil you’re talking about. If we had not peaked on light sweet oil, why else is so much money pouring into Fort McMurray?”

Meanwhile, Talisman reported higher first-quarter financial results fuelled by the sale of its stake in Syncrude Canada.

Net income of $520 million or 49 cents a share compared to $197 million or 18 cents a year ago. Excluding onetime items, earnings dropped to $276 million or 26 cents a share versus $485 million or 44 cents a share a year earlier.

The results were in line with expectations. Andrew Potter, an analyst with UBS Securities, described indications of a possible oil discovery in Alaska as “encouraging,” with positive long-term benefits.

Talisman said Wednesday the Arctic discovery may have tapped as much as 300 to 400 million barrels, but won’t know for sure until next winter.

Potter said a discovery of that magnitude could be worth $1.60 a share to the company’s bottom line.

“Until the wells are flow tested, we do not expect the full value to be reflected in the share prices.”

Talisman stock lost 58 cents in Toronto on Wednesday, to close at $21.30.

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