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Depletion and advanced extraction techniques
Posted by Heading Out on August 11, 2005 - 5:34am
(A guest post by J)
Ben Kenney has commented that he does not understand why Matt Simmons has said that there may be anywhere in the range from 28 to 30 mbd of oil coming out of the Middle East at the moment. Some of this relates to the difficulty in predicting how much oil will come out of Iraq in any given day, but there is another problem.
This relates to the problem of depletion that has been a theme of my recent posts. The Saudi's have admitted that they are seeing up to 1 mbd of loss a year now, and some of the numbers that come from the tanker side of the business suggest that they may be seeing some of this loss and its effect on immediate shipping. But J has tackled this from a more hands-on practical realism, and so I am glad to give this space to him to explain. He says things that we sometimes skate around. So here he is:
"Halfin, George and some others have been talking about production technology and revising Hubbert's curve to reflect the newer methods we use.
I think this is a valid exercise, but it needs to be pointed out that when horizontal, maximum contact wells are used, there is no depletion curve. Once the oil/water contact is passed and water cut (percentage of produced water) exceeds the economic limit, the well is toast. There is No, zero, none, nada further production to give a backside curve. You cannot put this type of well on stripper production.(Which is production where the residual oil is pumped out of the ground by a small donkey engine, typically).
The same holds true to a large extent for CO2 injection - when injection costs exceed set profit margins, then there is no more injection, and the field is done. Again, no depleting curve on the backside, and you cannot put this type of field on stripper production.
I have pointed this out numerous times - that putting fields into stripper production allows oil to "hang together" continue to flow and collect around a well. At slow pump rates, production is even renewing itself in many fields. Stripper production is what Hubbert knew as the standard practice, along with steam and a few other options. This was probably one of the extraction techniques for late life production that would give the declines that he used as the basis for his curve.
The curve is based on a finite volume of oil being available from a field. Assuming that this volume can be fairly accurately estimated, and knowing that the total production that can be achieved from any field is, at a maximum, 75% of reserve estimates, then the curve is, with this proces, a reasonable predictor. There is no technology out there, however, that can change this 75% average overall recovery rate. If anything, the 75% level is extremely optimistic for heavy oils, deepwater, and unconventional sources. (Ed. note Abqaiq is now estimated as likely to yield only 62%).
If you push the front side of the curve by increasing production volume, this will actually shorten the life-time (X-axis) of the curve, which brings the arrival of Peak Oil to an earlier rather than later date. If you make the curve taller by extracting the oil at a much faster rate and greater volumes to meet higher demands, then the end point gets closer to today. This is because the maximum volume at best stays the same, though the available volume may go down with these modern methods.
Since Hubbert assumed that the oil would be extracted by standard production methods, his curve is bell shaped. If you pop in a depletion rate of 30% (conservative based on what we are doing today), the back side of the curve will make professional skiers blanch - it will be very steep and abrupt. And this is exactly what the national oil companies are doing to stay afloat - they are ramping up production at the expense of total field volume!! The newer, higher production methods yield less total volume than the old methods.
You cannot have it both ways - you cannot increase production volumes and expect to increase total reserves. The converse is actually true due to the nature of oil deposits and production. If you produce it faster, you give up maximizing volume, and thus produce less than Hubbert used in his calculations. We use these types of calculation to determine if a field is even worth increasing production volume, or if it is better to leave it alone.
I don't have time (end of quarter crunch and whatnot) to address each production methodology, but these are things we know and work with everyday.
Technorati Tags: peak oil, oil
Ben Kenney has commented that he does not understand why Matt Simmons has said that there may be anywhere in the range from 28 to 30 mbd of oil coming out of the Middle East at the moment. Some of this relates to the difficulty in predicting how much oil will come out of Iraq in any given day, but there is another problem.
This relates to the problem of depletion that has been a theme of my recent posts. The Saudi's have admitted that they are seeing up to 1 mbd of loss a year now, and some of the numbers that come from the tanker side of the business suggest that they may be seeing some of this loss and its effect on immediate shipping. But J has tackled this from a more hands-on practical realism, and so I am glad to give this space to him to explain. He says things that we sometimes skate around. So here he is:
"Halfin, George and some others have been talking about production technology and revising Hubbert's curve to reflect the newer methods we use.
I think this is a valid exercise, but it needs to be pointed out that when horizontal, maximum contact wells are used, there is no depletion curve. Once the oil/water contact is passed and water cut (percentage of produced water) exceeds the economic limit, the well is toast. There is No, zero, none, nada further production to give a backside curve. You cannot put this type of well on stripper production.(Which is production where the residual oil is pumped out of the ground by a small donkey engine, typically).
The same holds true to a large extent for CO2 injection - when injection costs exceed set profit margins, then there is no more injection, and the field is done. Again, no depleting curve on the backside, and you cannot put this type of field on stripper production.
I have pointed this out numerous times - that putting fields into stripper production allows oil to "hang together" continue to flow and collect around a well. At slow pump rates, production is even renewing itself in many fields. Stripper production is what Hubbert knew as the standard practice, along with steam and a few other options. This was probably one of the extraction techniques for late life production that would give the declines that he used as the basis for his curve.
The curve is based on a finite volume of oil being available from a field. Assuming that this volume can be fairly accurately estimated, and knowing that the total production that can be achieved from any field is, at a maximum, 75% of reserve estimates, then the curve is, with this proces, a reasonable predictor. There is no technology out there, however, that can change this 75% average overall recovery rate. If anything, the 75% level is extremely optimistic for heavy oils, deepwater, and unconventional sources. (Ed. note Abqaiq is now estimated as likely to yield only 62%).
If you push the front side of the curve by increasing production volume, this will actually shorten the life-time (X-axis) of the curve, which brings the arrival of Peak Oil to an earlier rather than later date. If you make the curve taller by extracting the oil at a much faster rate and greater volumes to meet higher demands, then the end point gets closer to today. This is because the maximum volume at best stays the same, though the available volume may go down with these modern methods.
Since Hubbert assumed that the oil would be extracted by standard production methods, his curve is bell shaped. If you pop in a depletion rate of 30% (conservative based on what we are doing today), the back side of the curve will make professional skiers blanch - it will be very steep and abrupt. And this is exactly what the national oil companies are doing to stay afloat - they are ramping up production at the expense of total field volume!! The newer, higher production methods yield less total volume than the old methods.
You cannot have it both ways - you cannot increase production volumes and expect to increase total reserves. The converse is actually true due to the nature of oil deposits and production. If you produce it faster, you give up maximizing volume, and thus produce less than Hubbert used in his calculations. We use these types of calculation to determine if a field is even worth increasing production volume, or if it is better to leave it alone.
I don't have time (end of quarter crunch and whatnot) to address each production methodology, but these are things we know and work with everyday.
Technorati Tags: peak oil, oil
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Reading stuff likes this makes me realize that I really should prepare for the worst. I'm just glad I don't live in the US, it is not going to be pretty.
J:
When you write "and knowing that the total production that can be achieved from any field is, at a maximum, 75% of reserve estimates", do you mean as a maximum 75% of original oil in place? Or something else?
Stuart.
It would help to see an actual production curve of an oil well that has depleted in such a way. Not that i don't believe this story, but i must admit that the picture that i had in my had was the bell shape for (Wake up!!!), if it is more like a cliff, then the magnitude of the problem is even greater.
Lars
J, You have expressed the superstraw effect in words while other men have used charts to get the message out. Excellant post !
You have pointed to the BIG question .... How much time do we have to adapt to less fission energy after peak production ?
When Robert Hirsh gave his presentation to the DOE last year, he was quoted as saying "we are going over a cliff". That cliff is oil deplection.
George, that's me, mr. optimist, deep in the heart of texas, where everyone has several guns, several dogs, maybe a horse or two but no garden, no chickens or small animals for food, need electricity for water, perhaps three cans in the pantry.
but Hey ! they live in the country and watch CNN.
Hubbert's Bell Curve, Simmons' Cliff!
Lars - in Simmons book, he has these types of charts that show 10-15% declines, but suggests that the Saudis have been doing the big straw stuff on a much grander scale than ever before seen.
Thanks for the explanation, J.
I think this discussion just strengthens Simmons' point: we need much greater data transparency in the oil business, but until then we need to reduce oil dependency sooner rather than wait for clarity. How many people died because they were still waiting for science to prove beyond a shadow of industry-funded doubt that cigarettes might be linked to lung cancer?
It's not the "peak" that's the problem.
It's the downhill rolling EGG ... (Exponentially Growing Gap) that be the problem for us egg heads.
Demand for oil is growing upwardly at an exponential rate.
Supply rate is dwindling as we start to Hindenburg down Hubbert's back slope.
Yah understand yet? It's the downhill accelerating EGG and not just the "down slope" of Hubbert's Hill.
If the "EGG" concept is not terrifying you yet, you should sit through a sobering lecture on what "exponential" growth is really all about.
FTD (http://flyingtalkingdonkey.blogspot.com/) had a link up a while ago to a lecture on exponential growth. I hope he puts it back into the Matrix again. Or someone reposts it here. The beginning is boring, but sit still. You will soon be accelerating at life terrifying speeds as you start to grasp the concept at a gut level rather than at a cerebral level.
One of the major points was:
Time_to_doubling_of Demand= 70 /(rate of demand growth)
So if global "demand" for oil is growing at 10% per year, it will take a mere 7 years for "demand" to double. By 2015, the world will be demanding twice as much oil for consumption as it does now (assuming sustained 10% growth).
Where is the doubled up supply of oil going to come from if rate of production is sloping down? That is the downhill rolling EGG problem.
... call me cracked (call me Ishmael, call me Moby Idiot, ... just understand that we have a whale of a problem at the bow of our communal boat.)
....
No problem - if we cannot afford it, then it cannot happen in a market economy.
Question is, what other kind of economy is there on this planet?
From an economic standpoint, exponential growth can only continue with periodic resets (read depressions) back to baseline, or so it appears to me. We had one already, and it looks like we are diving into another soon, for lots of reasons.
C'mon you economists, where are you guys??
The reserves are calculated based on the reservoir size (normally visualized
in 3D), but that there is a large discrepancy between what is possibly
there (estimated reserves) and what actually makes it into a pipeline...
I think that most people believe that if the reserves are there, then we
will get all the oil...they are not realizing that proven reserves means
that the deposit is confirmed commercially, the oil proven there, but
the maximum reservoir volume is what gets used to calculate these
numbers...not the recovery rate.
This is one of the disconnects that makes people outside the business
make inaccurate assumptions...and when we are talking about something
as big and important as Ghawar, then the difference between proven
estimated reserves and ultimately recoverable reserves is surely worth
examining.
(that was me posting for J above).
Also, SB, I was putting a post together on that lecture and its importance, it should be up around 1p.
Price of Fuel is "Fool's Gold" and can easily backfire on the Peak Oil community.
Yes the public understands the hard kick between their bulging pockets, but that is the wrong message to send.
"Price" is not a "scientific" measure of anything. It is fool's gold because underlying our reliance on price as a fair measure of anyhting, is our "assumption" (wrong wrong wrong) that human beings act "rationally" when they negotiate prices. Human beings are not rational. The evidence is blowing up all around you and yet you deny it even as it explodes in your face. Take suicide bombers. They are "human". They are not rational. Take the voting public in democracies (us us). They vote for the sugar daddy politician that promises them candy. The voters are "human". They are simply not rational. So how can you rationally conclude that "price" --it being a fantasy number created out of thin air by negotiating humans, irrational humans-- is a measure of anything real?
It very well could be that the hedge hogs in the futures markets are currently cooking up the price irrationally as each digs his way to personal prosperity in our "Wealth of Tunnel Visions" society. I for one, sure hope so. I'd hate to realize that current prices accurately and scientifically reflect our current condition.
It's probably irrelevant for peak oil, but I would think that given enough time (which probably means years or decades) that a well that had CO2 enhancement would eventually recover enough for stripper wells as the CO2 diffuses thru the oil. Whereas when it's over for water EOR wells, it's over.
From what J said, doesn't the reservoir pressure in the CO2 injection process force the oil? Then when injection is stopped and the sand is saturated with CO2, it would just sit there??
Professor
Thank you for digging up that "yawn" but all so important lecture on exponential growth.
I urge everyone who has not sat through it to force yourself into grasping it at a deep gut, emotional level.
Yes, all of us are "smart". We have all seen the hockey stick graph in math class. We all groked it at the cerebral level. It is a whole other matter to grok it on a gut level.
Years_to-doubled_demand = 70/(percentage of per annum growth) !!!!!
10% ----> 2015 is year of doubled up demand !!!!
So sad that Newsweek / MSNBC shows a "Your Baby's Brain" picture next to Lovin's lovin article about how we can all make big "profits" and live without oil
article at
http://msnbc.msn.com/id/8769620/site/newsweek/
(hat tip to energy bulletin)
They should have had an ad for a Newsweek exclusive on "Your Brain"
--and shown a lemming head, which is what we all (me too) are. We all dig for personal prosperity in our Labyrinth of Tunnel Visions.
...
J:
I thought the total amount of oil in the ground was the "original oil in place", and "proved reserves" was what was believed to be economically available at the price and with the technology at the time of estimating?
Eg:
http://www.google.com/search?hl=en&lr=&client=safari&rls=en&oi=defmore&q...
says:
Estimated quantities of oil and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.
www.kerr-mcgee.com/media/med_glossary.htm
Reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves. There must be at least a 90% probability that the quantities actually recovered will equal or exceed the estimated proved reserves.
www.shiningbank.com/investor_info/glossary_of_terms.html
Stuart.
step back said:
'Price" is not a "scientific" measure of anything. It is fool's gold because underlying our reliance on price as a fair measure of anyhting, is our "assumption" (wrong wrong wrong) that human beings act "rationally" when they negotiate prices. Human beings are not rational...Take suicide bombers. They are "human". They are not rational.'
Citing suicide bombers as examples of humans being not rational is more than a strech, since they represent such a miniscule number of people.
Pricing in the marketplace is done by many people acting individually and rationally, for the most part. Marketplace pricing by many generally reflects the information available at the time. The race track provides a wonderful laboratory to study pricing. Under paramutuel betting, people bet among themselves. The odds set on horses in a race reflect the 'votes' of people using their own money, acting in their own self interest. These odds very accurately relect the true chance of a horse to win the race. This can be confirmed by comparing the proportion of horses winning in an odds category, over a long series of races (10,000 or more). The data show that the public sets odds that closely match the true chance of a horse winning, although they slightly underestimate at the low end (heavy favorites) and overestimate at the high end (longshots). The race track lab proves that people en mass price things accurately. More examples of this can be found in the book 'The Wisdom of Crowds'.
http://blogs.salon.com/0002007/2004/08/12.html#a838
Gasoline prices at my three neighborhood gas stations went frm $2.46 (regular) yesterday to $2.57 today....
benchmark crude oil touches $66 on the merc...
gold is up....
railroad business is booming...
natural gas is up ...
Indeed, we are living in interesting times...
Estimates are always maximized for stock prices and loan capital...
It may have to be proven on paper that 90% is attainable, but that
doesn't mean it will ever make the pipeline, and 10 years from now
nobody will be around who cares. Overestimation is built in at every
level of these "forward-looking" statements issued with reserve
claims...and there is absolutely nobody checking to see how accurate
they were. And even if they were grossly inaccurate, any engineer or
geologist worth his salt can absolutely make the case for why it wasn't
predictable at the time it was estimated. Do you really think that
corporate MBA's running things haven't figured out how to generate what
they want to within the SEC laws and guidelines? In short, the system
supports over-estimation, and on a large scale, and always will.
All you have to do is buy somebody else's assets to see how really
rampant it is. The "data rooms" they set up to show their assets are
always as positive as they can make them. I mean, don't most people wash
their car before they try and sell it? Same thing here!! But to keep
stock prices up, these discrepancies are never revealed. It makes your
stock go down if you buy a pig in a poke, and make no mistake - for
everybody in any oil company; it is all about the stock. If you buy a
car that is a lemon, do you run and tell all your friends about your
stupidity? Again, same thing - these bad properties are gussied up and
sold at a later time to a less sophisticated buyer, with even more spin
and wild calculations applied to them.
If you refuse to follow the money when dealing with people, you will
always be amazed at what the future brings. If you follow the money, you
will be able to discern what is really happening. When I talk with the
"average Joe" about Peak Oil, at least half of the guys I talk to want
to know what stocks to buy after we are through talking!!! They could
give a rat's ass about the issues - they just want to profit any way
they can!!
If you are going to take all the numbers people throw your way at face
value without taking the "X-factor" of human nature into account, you
will always come to the wrong conclusion. Accept proven reserves at your
own peril. I will take 75% of them due to the X-factor...just as if I
were running due diligence.
JimBobRay
I threw the suicide-brainwashed-bombers in as bait and it worked. It is an emotional trigger code --and you reacted accordingly, emotionally, as expected, as you were pre-programmed to do. Relax, you are not alone. I react emotionally to trigger codes as well. I too am a lemming.
You are partially right on the suicide bomber argument. They are a small number --YET THEY ARE THERE (it moves nonetheless). You deny their real and documented existence because their very existence, no matter how minute, contradicts the model that has been programmed into your head about the "Wisdom of THE MARKETS" and each rational human doing what is in his/her long term best interest.
THE MARKET is not wise. It is a mindless machine driven by the tunnel vision of Adam Smith's invisible and waving hand (waving bye bye to humanity). Each player is burrowing like crazy to build prosperity for number one. With all of us digging like crazy you would think we have a strong and sustainable labyrinth of interconnected economic tunnels. We don't. The ground around us is about to cave in because of the craziness of our consumptions.
Peak Oil is just one symptom of our craziness. It is a red pill. Once you swallow it, you start to realize that the Matrix of Market Manipulations is an illusion. Something else is going on, but what?
Here is statistically significant proof that human beings are irrational:
World War I
World War II
Vietnam War
War on Drugs (just say no, deer)
Global Warming
Deforestration
Easter Island
... all other Collapses documented by Jared Diamond
Are you going to deny all that too ?
As I said, the suicide bombers was just bait -but a real and really there bait.
Take the blue pill and continue to dream that "The Wisdom of the Markets" is going to save you.
Take the blue pill and continue to believe in the intellectual incantations of your economics professor. Surely they are right. They always were and always will be.
... :-)
JimBobRay: You write of the "wisdom of the crowd." I see that wise crowd called "the Electronic Herd" elsewhere. Does the herd really know why they're moving this way or that way, or do just a few individuals in the herd have an informed strategy? Will those individuals see to the safety of the herd, or will they take profit when the rest falter?
Fagan -
Profit Now!!!
This is the wallstreet mantra, right?
Spooky said:
'Profit Now!!!
This is the wallstreet mantra, right?'
It's the nature of life, it's what drives survival, it's what drives evolution, it's what has led to ascension of homo sapien as dominator of the planet. Life's only goal is to pass on the DNA, and in this regard, greed and selfishness are essential.
step back...
I'm going to 'take the blue pill and continue to dream that "The Wisdom of the Markets" is going to save' us.
When it becomes clear to the majority of people living in fossil fuel dependant countries that they are, gulp, in a spot of trouble then the crowds will repond in a rational way. They won't go irrationally over the cliff edge as do your lemmings; they will find a solution of some kind, one which will be very expensive and lead to mass die-off, but one which will allow the human species to continue.
Donal Fagan asks:
'do just a few individuals in the herd have an informed strategy?'
This blog has 'just a few individuals' with an informed strategy, but hardly anyone listens to us because we don't have a critical mass. But the herd will soon know what we know and will respond somehow, but how? The "Wisdom of Crowds" suggests they will help find the solution.
JimBobRay
--Not to pick on you, but rather on "the truth" you posed about the wisdom of the mob, consider the Peak Oil phenomenon.
The mob, says it does not exist.
The vast majority of the people --the very same people who make up "The Market"-- say that anyone who believes in peak oil is a cult manipulated freak.
So who is wise?
Us or them?
Remember they are the majority.
We the Peak Oil freaks are the minority.
Who is rational?
Them or Us?
Did you pick the correct answers ???????????
Did you do so "rationally" ??????????????????????????
Sorry, last question was another fool's bait.
I set you up with a fantasy menu: pick from column A or column B. "Us" or "Them"? "Smart" or "Dumb".
Actually "Them" is "Us" and we are all irrational. Trying to uncover the rational truth is hard hard work. That's because we all deny we are irrational. Me too. :-)
p.s.
Take a good look at the rational market:
http://i.a.cnn.net/cnn/2005/images/08/11/top.oil1.ap.jpg
This is the top picture on CNN right now as they scream about the number: 66
Stepback, why all the worry? Why all the sweat?
Amory Lovins of the Rocky Mountain Institute has assured us in this week's Newsweek that quick fixes are just around the corner:
"A backlog of powerful ways to save and substitute for oil, amassed since the 1973 oil embargo, remains mostly untapped, even in the most energy-efficient countries. Automakers for instance could profitably increase fuel mileage to 66 mpg (3.6L/100km) for light trucks and 92 mpg (2.6L/100km) for cars."
etc. etc.
It's as simple as that. Relax -- in five year's time there will be such a glut of conventional oil that it will be 'too cheap to meter'.
SARCASM OFF
CC: Hakuna Matata!
http://www.niehs.nih.gov/kids/lyrics/hakuna.htm
:-)
Uh, your Amazon ad is displaying in front of your post's text. No can read!
Markets work wonderfully in the presence of good information (as most race tracks are in their narrow case). Market efficiency drops as bad information drives out good, often leading to extreme corrective moves once that information is seen to be bad.
According to that model, there will be ample proof that the markets are both wise and foolish--in different contexts.
And trying to provide good information is what this site is all about, right? As the prevailing models work less and less well, more people will look for alternative explanations. Those of us who think we're seeing a bit more of the elephant need to be ready to provide them with compelling ones.
On a personal note, I failed in that regard recently. While pumping gasoline, the person on the other side of the pump opened up conversation with a complaint about gas prices. I responded by saying the price would only rarely come down, because we would have less cheap oil. He vehemently denied that we were running out of cheap oil, and said the whole problem was a lack of refinery capacity caused by politicians in Washington (I suppose the subtext was environmental concerns). I tried to counterargue that oil companies would have built refineries if they thought they could profit by it, but I failed to make the case. I'd like to plead fatigue, but I do need a better "capsule" argument in cases like this.
as per SqueakyRat, I also cannot read the posts; the ads get in the way.
What I do is copy the top couple screens worth of material onto a word processing document, so I can read them. Pushing all the "there's more" buttons helps lengthen the text, so I can eventually read it.
I was hoping you would fix this problem, but it's been going on for a couple weeks now.
This doesn't happen on any other web site I visit.
Jim and Squeaky Rat, do me a favor? Send me an email at the TOD address with: your screen resolution and browser/version...you're the only two I've heard of that this happens to (no one else has said anything...). What exactly is the problem? the amazon ads come over the text? weird.
you wrote:
Once the oil/water contact is passed and water cut (percentage of produced water) exceeds the economic limit, the well is toast. There is No, zero, none, nada further production to give a backside curve
...
The same holds true to a large extent for CO2 injection - when injection costs exceed set profit margins, then there is no more injection, and the field is done. Again, no depleting curve on the backside, and you cannot put this type of field on stripper production.
but the profit margin is the function of the oil price! therefore fi the well becomes uneconomical at $60 it will reenter production at $120! therefore there will be backside curve.
I think what you should rather look at is thermodynamical balance of exploiting oil. when it becomes zero the well must be shut. up until that point the well will resume operations as long as the price rises enough
JIMBOBRAY (or whatever):"The race track provides a wonderful laboratory to study pricing."
This is your example of rational? a RACE TRACK?
HAHAHAHAHAHAHA!
AAAAAH, HAHAHAHHAHAHA!
mikeB,
Sounds like you've gone utterly insane. It's clear that we're trying rationally to grasp at straws as we look at doom in the eye, but here you are not only done stepped over the line, but are now rolling in the mud on the other side.
C'mawn now.
can any one tel me why laitly Light Crude oil and Brent Crude are olmust at same price ? samdi,