Saudi Arabian oil declines 8% in 2006
Posted by Stuart Staniford on March 2, 2007 - 11:10am
At that time, while the conjunction of declining production and rising rig counts was striking, I wasn't ready to draw firm conclusions on the data through August-October (depending on agency). Recently, Jim Hamilton raised the same questions:
The first possibility is that the Saudis could still pump 10 mbd or more today if they wanted to, but they are cutting back production and exploring like mad because they put an extremely high value on having 2-3 mbd of excess capacity. If so, the recent price behavior suggests that the reason they would seek such capacity is not because they want to stabilize the price, but because it puts them in an incredibly powerful negotiating position. For example, the ability at any time to flood the market could be used at an opportune moment to undercut expensive alternatives such as oil sands that require an oil price over $50.What I did in this post was to look in more detail at what happened from the beginning of 2006 on, which is when the apparent decline begins. I added data from a fourth source (the OPEC Monthly Oil Market Review), and for each of the four sources of data, I fit a linear trend:The second and more natural interpretation is even more disturbing: the mighty Ghawar oil field is already in decline, and the Saudis don't want anyone to know.
The resulting graph is extremely striking, I think. The four different sources all estimate Saudi production slightly differently - they fluctuate in different ways month to month, and disagree over the absolute level (that last may be differences in exactly what is defined as oil). However, the regressions make clear that all four sources are in strong agreement about the nature of the decline. The slopes of the lines are very similar.
The implied decline rate through the year is 8% ± 0.1%. (Note that the year on year decline from 2005 to 2006 will only be about half that, as the decline only began at the beginning of 2006). As far as I know, there are no known accidents or problems that would explain any restrictions on oil supply, and the Saudis themselves have maintained publicly that their production is unproblematic and they intend to increase it.
It's interesting to note the pattern in the underlying data where declines start, are interrupted in the middle of the year, and then resume. I take this to be due to the coming onstream of the 300kbpd of liquids from the Haradh III megaproject:
HARADH, February 08, 2006 -- In a record 21 months from approval of funding, oil started flowing through the new Haradh gas-oil separation plant (GOSP) from several of 32 new wells that will feed the facility.It seems this did not do more than briefly interrupt the declines. We can get a clearer picture as follows. What I did was average the EIA, IEA, and JODI series for 2005 and 2006 into a single estimate. Onto that, I've hand drawn a couple of guidelines that are 300 kbpd apart vertically:...
Full production will be attained by the new plant within the second quarter of 2006.
My intepretation is that the bump in the middle of the year that separates the two lines is due to the impact of Haradh III coming on stream. So that tells us that, given some extra production capacity, Saudi Aramco immediately threw it into the production mix. And the effect of that? It lifted the plummeting production curve up by 300kbpd, but did nothing to change the gradient of the plummet. That suggests that the Saudis had nothing else to throw at the problem.
It also suggests that last year's underlying Type II decline rate, before megaprojects like Haradh III, was 14%.
Overall, I feel this data is clear enough that I'm willing to go out on a limb and conclude the following:
- Saudi Arabian oil production is now in decline.
- The decline rate during the first year is very high (8%), akin to decline rates in other places developed with modern horizontal drilling techniques such as the North Sea.
- Declines are rather unlikely to be arrested, and may well accelerate.
- Matt Simmons appears to be right in Twilight in the Desert, but the warning did not come until after declines had actually begun.
I suggest that this is likely to place severe political strains on Saudi Arabia within a year or two at most.
I also looked at the question of whether there is any evidence for the idea claimed by OPEC that the Saudi's deliberately cut production starting in November. Specifically, I constructed a series that represents the average decrease, month-over-month, in the four series. That data looks like this (the blue box is one sample deviation up or down from the mean - the heavy black line).
As you can see, November and December are statistically indistinguishable from the collection of other months. There is no statistically significant evidence for the idea of any cut in those months other than whatever ongoing process controls the production declines. The most notable feature of the graph, the large jag downwards in the middle of the year, again appears to be due to the impact of 300kbpd of new production from Haradh III. The production data simply don't support the narrative that the Saudis were going along producing fine and then deliberately cut production in November to help support prices.
This raises the question of whether OPEC, taken as a whole, deliberately cut production in November/December.
There is some evidence of a very slight acceleration in November of a process of declining production that was ongoing throughout the second half of 2006 (and in to January of this year). This excess decline does not exceed 200 thousand barrels per day. On the whole, media coverage of OPEC production cuts appears to be almost completely unmoored from the data the agencies are reporting. The entire "production cut" may be a public relations exercise to disguise other processes.
Finally, it's interesting to note this Saudi Aramco press release celebrating their achievements in 2006:
2006 was a year of outstanding accomplishment. That was the message coming from the Feb. 21 meeting of the Executive Committee (Excom) of the Board of Directors in Dhahran. “The company reacted rapidly to changes in global crude oil supply and demand during the year,” said president and CEO Abdallah S. Jum‘ah, relaying the results of that meeting in a teleconference Feb. 25. “Ambitious programs were proposed to expand future crude oil production and gas processing capabilities, and for increasing refining capacity both in the Kingdom and overseas.”and
Among 2006 accomplishments were the optimization of upstream operations, and development and depletion strategies to meet crude demand and increase maximum sustained capacity to 10.7 million barrels per day (bpd).I'll bet $1000 with the first person who cares to take me up on it that the international oil agencies will never report sustained Saudi production of crude+condensate of 10.7 million barrels or more.
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Hit reddit, hit digg, hit your favorite link farm! :) Send it to slashdot, metafilter, del.icio.us, stumbleupon, etc.
Make sure you send this to big and small media alike, send it to your friends, office holders, whatever. This is big news and this analysis needs to be read.
Let's get Stuart as many eyes as we can.
The articles of 1 and 2 march both reached the frontpage of Reddit. Congratulations to all contributors, keep up the momentum.
the good news is that those Kellog Brown and Root detention camps are going to be up and running just in time for this.
http://news.pacificnews.org/news/view_article.html?article_id=eed74d9d44...
Ah Yes. A fellow chimp.
==AC
Well, some of us, including Darwinian, have been out there on the limb for quite a while. Of course, I was just building on work done by Deffeyes & Simmons, primarily using Khebab’s HL graphs.
One point about Simmons’ book. When he wrote it, and when it was published, Saudi Arabia was still showing near record high production levels.
http://www.theoildrum.com/story/2006/1/27/14471/5832
Hubbert Linearization Analysis of the Top Three Net Oil Exporters
Posted by Prof. Goose on January 27, 2006 -
Guest post by Westexas
http://www.energybulletin.net/16459.html
Texas and US Lower 48 oil production as a model for Saudi Arabia and the world
first published May 25, 2006.
Jeffrey J. Brown & "Khebab", GraphOilogy
WT: What I find really interesting is that as Russia has surpassed KSA it is being portrayed in the MSM as the new "oil giant". I think you were saying that the HL method has Russia as 95% depleted. Not even a whiff of this possibility is hitting the MSM.
Based on the HL plot, Russia is now on the order of 90% depleted (at least from mature basins).
Also based on the HL model, Russia has been making up for what was not produced, following the collapse of the Soviet Union. IMO, they should start showing a sharp decline in production, probably this year.
Because of higher domestic consumption, Russia reported about a 2.4% decline in net oil exports, from 2005 to 2006, even though they reported higher crude oil production.
In any case, as I predicted in the January, 2006 post, Saudi Arabia and Russia joined Norway in reporting lower crude oil exports.
My usual disclaimer: I started studying the Net Export issue because of some of Simmons' early work, and my conclusions were based on Khebab's HL plots.
In the Land of the Munchkins little Dorothy was a giant.
Question of the day - How many of you oil guys can get out on that limb before it breaks and hits the MSM firmly between the eyes?
Here is some positive breaking NEWS -
Solar giant Solar World annonced plans to build the US's largest solar cell factory. In Hillsboro,OR 20 miles west of Portland, OR
http://portland.bizjournals.com/portland/stories/2007/02/26/daily39.html
Saudi Arabia, tank farms, new production and new oil fields.
On yesterday’s DrumBeat, Leanan posted two links on Saudi Arabia. The first stated that Saudi Arabia had increased crude oil production to 10.7 million barrels per day. The second link was more clear and stated that Saudi Arabia had increased production capacity to 10.7 million barrels per day. The latter figure was no real shocker since that is about the same production capacity that the EIA has been claiming Saudi has all along. The latest EIA Short Term Energy Report says Saudi has 1.7 to 2.2 mb/d in excess capacity of crude oil. And that figure has increased as Saudi production has decreased to hold Saudi capacity between 10.5 and 11.0 mb/d.
But nevertheless some people got very excited over that number and suggested that Saudi may be actually producing 10.7 mb/d and storing the excess oil in tank farms. Roger Conner suggested:
Highly unlikely. The amount of storage capacity Saudi has is no secret. They have 33 million barrels of storage capacity at Ras Tanura and another 17.5 million barrels of storage capacity at the export terminal of Al Juaymah. (Pronounced Jo-Ama) At these export terminals, different tankers are loaded with different grades of oil, according to what the customer has ordered. The tank farms here hold this oil in order that every customer can be accommodated. There is probably another 10 million barrels of storage capacity located around the country but these tanks would be special purpose tanks located at gosps or holding oil for power and desal plants. And, according to Matt Simmons, Saudi has another 10 to 15 million barrels of tanks, which they rent, in Rotterdam and the Caribbean.
It is extremely unlikely that Saudi has built millions of barrels of new tank farms for the sole purpose of collapsing the price of oil by dumping excess oil on the market. If they built such a giant tank farm in the last couple of years, we would know about it.
The tanks at Ras Tanura and Al Juaymah would normally be kept near capacity anyway, to be used for the express of offloading oil to tankers. But yes, they could be used to flood an extra million barrels per day or so on the market for a month or so. But that would not collapse the oil market. Push it down a bit for sure, but not enough to cause an outright collapse.
One more point concerning Saudi Arabian oil production. This was posted a few days ago:
Saudi went deep into the heart of the Rub al-Khali to find this little patch of oil. The “Rub al-Kaali represents one of the most extreme areas in the world with summer temperatures shifting from below 0ºC at night to over 60ºC at noon. Dunes can reach heights of more than 300 metres.” Needless to say this is one of the most inhospitable places in the world to drill wells and to lay pipelines. Yet this represents the extremes Saudi will go to in order to produce just a little more oil. But they are said to have 264.2 billion barrels of proven reserves.
Proven reserves means they know exactly where this oil is. To produce it, they would just have to go to a spot they already have plotted on the map, sink a well and produce more oil. Yet they do not do this, they instead go deep into the Rub al-Khali, search for years, (they were exploring the Rub al-Khali when I was there over twenty years ago), until they find a tiny patch of oil, then crow about it to all the world. Something here just does not make any sense.
Ron Patterson
Saudi Tank Farms
http://lcweb2.loc.gov/cgi-bin/query/r?frd/cstdy:@field(DOCID+sa0071)
Simmons on Saudi Tank Farms
http://agonist.org/story/2005/6/6/151857/0004
Rub al-Khali
http://lexicorient.com/e.o/rub_al-khali.htm
"They have 33 million barrels of storage capacity at Ras Tanura and another 17.5 million barrels of storage capacity at the export terminal of Al Juaymah"
I disagree on this point and I will elaborate: The oil could be pumped back into the ground of a depleted oilfield of high porosity where it would be possible to inject water and easily extract that oil again. Voila: a big oil tank. And how big? Massisve? It took me 45 seconds to formulate this idea so feel free to shoot me down:-)
Marco.
The oil loss, back into the reservoir, would be too high. This is really a function of grain size and permeability in the reservoir. Some of the oil would be left behind in the pore spaces in the rock. Note that this is not a factor in tanks farms and underground salt caverns.
I really need to order, from amazon, that book you reccomended!
Why do I envision in my mind's eye a giant squirrel wheel with a gigantic squirrel running madly on it?
Because your medication is far too strong.-)
Something like this?
HONG KONG -- A health club here is hoping that a car battery, some StairMasters and dozens of gym rats can help ease the world's energy problems.
Rita Wong is doing her part. One evening recently, the fit 27-year-old, dressed in black spandex, pedaled furiously on an elliptical machine at the California Fitness health club. As she worked up a sweat to a Madonna song blasting on the gym's sound system, the energy she created was transformed into electricity and stored in a battery that powers some of the gym's lights.
tinyurl http://tinyurl.com/27gexy to the wsj article
Fantastic work !!!
With my prediction of a peak in prices between
Feb 15- March 15 looking great maybe we can combine this information to guess at the next price peak.
On the back side of a declining resource prices tend to fluctuate wildly I've posted before that the overall movement of oil is controlled simply by how fast a tanker can deliver and return. This gives a rough 3 month internal per tanker.
Which leads as I explained in other posts to a cycle of 3 price peaks a year post peak. All quit rough but reasonable.
So given the information provided by Stuart and the above post we can assume that the best that can happen this summer
is a 30 day "tank" surge from KSA. In other posts I'd estimated that they could surge for up to 60 days. This would be a combination of drawing down their tank storage and pumping full tilt at a level that damages the fields.
Next you have to add in WT export land model and the collapse of Mexican production.
What all this means I think is that we can expect prices to decrease soon in the early spring bringing us off our current peak or they plateau at around 70 a barrel. I cannot see them dipping below 60 ever again. This puts the next peak in price at around June 15 to July 15 maybe shifted slightly later if SPR draws are initiated early.
So given what has just presented we can expect a small surge form KSA in the next month or two that will dampen the rise in prices we see right now and could cause a small dip.
This surge will end and we should see a very strong summer peak passing 80 a barrel with ease and headed for 100.
This will generate demand destruction finally leading to a drop and probably quite a few draws on the SPR.
And finally we get our new depletion driven peak in the fall as people fill any storage the have in preparation for winter. Oil will begin to behave like NG with full production of the entire year required to meet the demand peaks.
I don't think demand destruction from recession will be enough to hide this geologic signal. Note that 2007 would be the last year that we actually can smooth oil supplies if KSA is in decline. In 2008 we will not only see stronger price swings but real shortages begin to develop. 2009 would be the first year that Peak Oil gets attention from the MSM as a potential problem :)
Expect political upheaval in Mexico and KSA by 2009.
Finally the key is too expect a surge from KSA in the next few months but this means nothing and won't last the summer its a mix of emptying tanks and overproducing fields. Also they may start dropping some support for internal consumption to redirect some oil to export. Maybe WT could see what that would gain by moving say 10% of production to exports I'm not sure how many bpd this would be. It would cause tension internally but it would help hide their depletion for a little longer. Politically KSA has to show some sort of surge soon. They may briefly show 9 or even 10 mbpd.
Now if KSA can't even do this mini surge ....
Why?
Oil supplies aren't all that tight. People have more-or-less adjusted to $50-60/bbl levels, so why would SA want to disrupt that? Just to prove they can?
Doubtful. Very few people doubt their ability to do so - SA has announced voluntary production cuts, and I'd bet at least 95% of the people who are aware of Saudi production levels have little reason to disbelieve them. Regardless of how much people at TOD may believe SA has something to prove, SA isn't all that interested in what we think.
Until the summer rise in demand starts kicking in, there's no reason to expect much increase in Saudi production. And maybe not even then if the US housing situation turns out worse than expected.
In my opinion if we are truly post peak.
We will see a brief respite in price increases towards the end of march-april then its going to go to the stratosphere this summer. 100 plus easy and fast. Their is a really good chance that 70 will be our new low and our dip won't dip.
KSA must "open the taps" to show the world they can still produce but its a charade based on drawing down tanks overproducing fields and potentially taking supply away from the internal market.
Bush will open the SPR to "help" while KSA increases production and they probably will claim a lack of tankers for sending the oil since they have not used this excuse yet. Or maybe a bunker fuel shortage.
I'm pretty certain it will be some sort of claim based on transportation since they have not used this card.
Worst case Bush will attack Iran if needed. I'm sure he is praying hard for some reason to open the SPR to cover KSA.
We are peak oil aware its not shocking to us but I assure you once the MSM realizes that we have peaked we will see a strong political backlash.
KSA will make a charade of increasing production for a few months. But 60 days is about all they have IMHO.
This does not invalidate Stuarts graph in the least.
My point is KSA must and almost certainly will show some sort of increased production as prices cross over 70 this summer but its not based on real capacity its a sham.
I have no qualms in saying that if we are post peak oil prices will reach highs not seen before only a major effort on the part of KSA to show a fake production increase and SPR releases will keep it from spiraling out to 150-200 this year. If Stuart is right the first big one is this summer.
A fall peak is also a must as the SPR and KSA tanks are refilled.
Next year the party is over.
memmel, you get points for sheer cojones. You've really put them on the block, so to speak.
So has Stuart...this is what is truly scary. Stuart does not put his reputation on the line unless he's pretty confident. Now, mix in some nasty weather this year on top of the geologic constraints and this beast has a probability of breaking out.
I am 100% sure that PO awareness is this year. Whether we are at true peak or not will be of little consequence when a majority reacts to the reality of PO.
Tom Whipple is smack dab on target and right now is the best media mouthpiece that understands TOD and takes it serious. Kudos to you Tom because I know you are reading here. Keep up the good fight on the information front lines. There is a time and place where certain messages reverberate through the noise of disinformation. That time is fast approaching.
po awareness probably needs the market to accept that sa is going down for the count... not clear that even steady decline will establish that this year given that they will continue saying 12Mb/d by 09. People will believe what they want to believe - oil/sa is like a religion.
Again, why? That you personally consider something to be important does not mean someone else "must" do it.
KSA storage capacity is (according to other posters in this thread) only about 60Mbbl. If they really are in 8% decline, they'll be down to 8Mbbl/day by summer, so any storage-driven increase over current levels won't last for more than two months. If we see an increase over current levels for more than two months, then, KSA is not declining as you suggest.
We shall see.
I don't think that's right. A smooth 8% per annum decline would take it down to about 8.15 mbpd, if they were at 8.5 at the end of 2006. There'll be fluctuations, of course, so we could probably only start to think of further confirmation at the end of the year.
I'm rounding for simplicity, of course.
Depends on what happens. If, for example, there's a strong demand increase as we hit summer and nobody else (e.g., Russia) steps up to the plate, there'll be substantial pressure on KSA to open the taps.
If they do - for a sustained period - then we'll have one answer. If they don't, then we'll have additional (although not conclusive) evidence of another answer.
Of course, an economic lull in the US could potentially prevent demand pressure (both directly and due to knock-on effects in China), so there's no guarantee we'll see KSA tested thusly this year. A continuing decline over the course of the year would be pretty indicative, though (depending on the global oil supply situation.)
Do you have a typo in the above paragraph? Did you mean "plateau at around 60 a barrel"? Otherwise I am a little confused by how the plateau can be 70 when the current spot price is around $62.
Sorry I don't know how to explain it but the peak may turn into a plateau or drop slightly and plateau higher than 60.
Its a shoulder peak. The question is whats the new base price going forward its somewhere between 60-70 so depending on how things go price may stabilize at 70 i.e not drop from the peak price that should happen in the next few weeks. Or they could climb a bit more and drop back to 60.
In short we don't know what the floor price will be a bit later in the spring when production is geared up for summer but demand is briefly behind production capacity.
I'm not trying to call price points just trying to map the expected price oscillation signature of peak resources to oil prices. The base frequency of 3 peaks in prices a year with a higher valley price is I think intrinsic and valid for the oil supply if we are post peak.
What you are saying is that if the analysis holds out, the US presidential election in 2008 (and some other national elections due around the same date) will end up being predicated on dawning realisation of peak oil.
That's an important fact to note, not only if you are a candidate, but from the wider perspective of the reaction to the news.
Is there a prefered course of action to address the short and medium term impacts of such news? Do we know what that is? Because if we do, NOW is the time to be drawing that into a coherent package and making it available to be wrapped into candidate platforms.
Its all very well talking about the academic aspects of peak oil, its another to do something positive about it.
We have a winner :)
I almost came out and said it. But yes at the end of the day GW has to figure out how to game peak oil so it benefits the Republican party. The only positive is it will blind side Democratic candidates. American's become very aggressive when they can get cheap gas for their SUV's. So I think the show with Iran is aimed and timed to precipitate a crisis in conjunction with the new peak oil awareness that will occur at this time. Realize that trouble in Mexico will hit hard about this time too.
Seldom are Americans willing to abandon a political leader in a time of crisis so the trick is to get every thing to come together so the republicans can look like the good guys to scared SUV/McMansion owners. The Democrats will face a tough choice with the Mexican/American vote and problems with the surge of illegal immigrants from Mexico.
A lot of crap is being done now so the Republicans can win the 2008 presidential elections at almost all costs.
Understand that by 2012 we will probably be under some sort of martial law or elections will be canceled because of violence. So whoever wins in 2008 will run the country for a looong time. It's the last election with a semi-functional American middle class so its really the prize of the century.
Even more reason why the Democrats need to get policy acts together. There may not be much difference between the two parties, but they are marginally less likely to drop the bomb on someone who won't give up their oil quietly.
And don't over estimate the importance of the US (after all, in world terms their power has a close sell-by date on it). There are a number of other elections around this timeframe that will get determined by real issues and real problems for the first time in ages.
The peak isn't important per se, its the gradient of the decline and the shape of our reaction to it that define the shape of the future.
Important questions.
My prediction....Obama is the only one with enough savy and raw, instinctive trust to pull this off. He can brush aside attacks like they were flies and he can think on his feet.
You get the subliminal feeling he is telling the truth...people are lusting for someone to give a damn about them.
He will the ONLY candidate that has a chance to pull the diverse groups of people together. And he can talk about energy to people in a fashion they understand.
He will be the only chance this country has to avoid all out martial law.
I happen to agree. One thing a lot of people forget is America has a lot of fine cracks like a porcelain vase that been dropped a few times. These can be exploited to destroy the vase or they can be annealed Obama seems to be and annealer type.
Obama is pledged to the corn lobby, among other crippling flaws in depth of perception.
that's what happens when your constituency is Illinois...
now, as for a national constituency...that of course is a different matter.
Oh please... God bless the idealism. Obamma will invade Nigeria the same as Rudy- or anyone else. The democratic party can't even agree on incresing milage standards. Hardly a recipe for me to be enthusiastic. Bash/blame Bush or the republicans all you want. I suspect the problem is really in the mirror.
So I think the show with Iran is aimed and timed to precipitate a crisis in conjunction with the new peak oil awareness that will occur at this time.
Right, it has nothing to do with Iran building nuclear weapons, which should be obvous to anyone with a secret decoder ring and a Dan Brown book.
Understand that by 2012 we will probably be under some sort of martial law or elections will be canceled because of violence.
Yep, and we'll all be eating Soylent Green and chanting "IGNORANCE IS STRENGTH!" The survivors will envy the dead.
Your oil analysis is interesting, but your political analysis is just babbling paranoid lunacy.
More likely, we'll just see a perfectly rational political and market response: increased use of renewable and nuclear energy as oil prices rise, and more development of alternate extraction technologies.
Well, I don't hold out any hope for rational political responses. Market response isn't rational, either, it's based purely on the profit motive. Nuclear can't just be ramped up, though I'd expect to see an increase in the planned use of nuclear. Renewables that can be expanded are a tiny percentage, at the moment, so any significant decline in oil is unlikely to be made up by renewables, especially as there isn't much renewable liquid fuel that doesn't require oil to produce.
I was at ARAMCO in 1980/81 - before I got kicked out (much to my relief) for having an airline girlfriend.
I remember at that time seeing the giant machines they had for traversing these amazing dunes in the Rub al-Khali (the Empty Quarter).
At that time, the Americans, who more or less ran the show, explained that the Saudis were desperate to find oil outside the Eastern Province (i.e. the Shia province).
Saudis from Riadh and Jeddah feel quite out of place in the Eastern Province. The inhabitants of Eastern Province feel quite uncomfortable, or worse, when they have to visit the capital, Riadh, on official business.
In fact, the Shia do all they can not to have to overnight in Riadh - they have to get the last plane back. Quite odd considering they all, supposedly, are citizens of the same country.
Alfred, this new field is entirely within the Eastern Province. Over half the Rub al-Khali is located within the Rub al-Khali, the rest is in the Central province where Riyadh is located. The only oil in Saudi ever found outside the Eastern Province were the Hawtah Trend Fields, discovered in 1989. They are located just south of Riyadh.
The southern end of Ghawar juts into the Rub al-Khali and the new patch of oil is 70 kilometers Southeast of the southern tip of Ghawar.
Ron Patterson
http://en.wikipedia.org/wiki/Ash_Sharqiyah_Province
"Citizen" doesn't mean much in SA; it's still very tribal. Saudis have few rights, especially women, who have virtually none (it is not uncommon for "disrespectful" women to simply vanish in the desert).
There has always been a lot of fear of a "Shia crescent" forming.
Ron,
I cannot and will not disagree with your analysis per se, it is a good one, and of course Stuart is always on top of things...we will just have to wait and see.
This may be the end of the Saudi road as far as having the production clout to pull it off (we all know that day has to come...when is the question), but I am still very cautious about them.....I am an old man, and the spectre of 1982 still haunts me....
Roger Conner
Remember we are only one cubic mile from freedom
FWIW:
http://fe1.news.re3.yahoo.com/s/ap/20070226/ap_on_re_mi_ea/saudi_frenchm...
"The area where the attack occurred also is home to oil installations, which are part of the Strategic Oil Storage Project — a massive underground facility that includes five sites across the kingdom."
I thought I recall a note about KSA claiming new production expansion from a very old depleted field and Simmons claimed this field was used as as an undergound storage facilty. Although Simmons might have referring to Natural gas storage.
I don't believe that KSA is stockpiling oil to drive crush prices. I do believe that they are probably slowing stockpiling some oil to cover for short term emergencies or for future planned maintaince. At best probably enough to cover production for a coupe of weeks for unforseen events.
Here’s the IEA 10 year time series, are we in a new regime or does this just represent more of the same? Maybe after seeing how the world managed with the jump from $20 to $60, the Saudis would like to see if $90 is sustainable?
Source: IEA Supply
Chris I think the real big difference, more than the oil price, is the rig count. It's really up there in the sky.
This point is the important piece to the puzzle. Cuts and increases that are independent of the ocean rigs are understandable. However when you are cornering the rig market and you either cant, dont, or wont produce more with the rigs, which choice appears more logical?
I think Tate hit the nail on the head. Why grab all of those rigs and not produce with them. SA is producing full tilt and the increased rigs are not able to make up the decline in the other mature fields. When you start piecing the information together you begin to see how scary this whole situation is.
Chris:
I would like to, but don't have time to, respond at length with additional graphs. Let me just quickly outline my response to your points:
My own conclusion has been for some time that there was no evidence that they had any spare capacity any more. Al-Naimi has been quoted saying that they no longer saw themselves as a swing producer.
Of course, I'm interpreting all this in the context of background that we generally know there are question marks about the future of Saudi production - significant parts of Ghawar have been documented to be depleted, the new megaprojects are almost all reworks of fields which were developed before and didn't produce terribly well, Hubbert Linearization has said Saudi Arabia is probably close to peak, the 1980s reserve increases, etc.
I should add that Heading Out has, for some time, been pointing out that the arithmetic of the planned megaprojects, the Saudis own statements about their depletion rate, and their planned capacity simply didn't add up, and were shifting over time, with more and more of the projects being projected to cover depletion, rather than increase capacity.
I meant "decline rate", not "depletion rate".
Stuart,
I am sure you are aware but others might not be that Haradh and Haradh 3 are part of the southern portion of Ghawar and are not a new field. Also backing your assumptions are the fact that they had to increase water injection in Ghawar last year by another 2.5 million barrels per day.
An A.A.P.G link I have have shows that in 2004 Ghawar had produced about 79 billion barrels and had 17 billion left to produce. 80% depletd.
Chris,
This is a wonderful graph. But some people might say that Saudi oil production has declined before. So how do we know that this time the decline is permanent?
Can you please plot the spot price of crude oil on the same graph so that everyone can see that in the past when Saudi production was declining, the price was falling.
Thanks for your efforts.
This is in now way conclusive, but we must consider that the demographic situation (and resultant pressures) inside Saudi Arabia provide a different background to this decline compared to past declines.
Here's a link to a graph of Saudi population increase:
http://en.wikipedia.org/wiki/Image:Saudi-Arabia-demography.png
Population has doubled from 13.5 million in 1985 to more than 27 million today, and the rate of increase is only accelerating (population increased 23% since 2000, and continues to increase by rougly 3% per year!)
In addition, the number of the royal family on "official stipends" in excess of $100,000/year has mushroomed to over 5,000.
This represents a huge and continuous revenue demand on the Saudi government--they must keep essentially buying off both of these groups in order to maintain their currently tenuous control. Most problematic is that the general standard of living has begun to decline (along with quickly rising unemployment among young males), and the low-6-figure stipend granted annually to peripheral royalty is no longer sufficient to buy their loyalty (but it is sufficient to make them potential financiers and organizers of an internal opposition).
Viewed in this light, I think that we must be very skeptical of any theory that suggests that the Saudis are voluntarily forgoing any significant levels of revenue for anything other than a couple of months (this includes voluntary OPEC cuts, storage for a surge at a later date, etc.). Their regime would struggle to survive such a move--not matter how wise it may otherwise be.
I think that this background adds some weight to Stuart's conclusion that this is not a voluntary decline.
HIGH RIG COUNTS are the tell.
Off the cuff, the previous declines appear to have been composed of straight line segments - e.g., cut 100,000 bpd every month, with a resulting sharp peak. This latest decline appears to have a more rounded peak, and a gradually increasing decline, more like a natural process. Admittedly, that's reading a lot into the above graph.
The last year looks eerily smooth. The volatility and sharp peaks are gone. Just a smooth downward exponential.
Even though I don't think that Hubbert linearizations for countries have 100 % predictive powere (more like 50%, think of double-peak countries like UK) I have to admit that the last part of the SA graph looks different.
http://static.flickr.com/55/145186318_27a012448e_o.png
You need to add 2006 to that graph.
Stuart
I always enjoy your posts. Thanks for the time you generously contribute to us all.
I think your post is a little cautious. Last mar they produced 9.5, they acknowledged 8.5 in jan, so 10% in ten months = 12%/year, and this after bringing new production on line... imagine what the decline rate would be if they did nothing...
Have thought for some time they are in blind panic mode.
Thought they would have more rigs by now... of course, everybody wants a few more rigs...
We are seeing the same thing everywhere, whether drilling for oil in sa or for ng in the us; more rigs = less production.
Mmm. The danger of taking two points and differencing them is your estimate is then very subject to noise (since there are quite a lot of fluctuations month to month). That's why I fit lines to the data and then estimate the number for that (the lines drops 0.75mbpd in a year, and 0.75/9.5 = 8% near enough). The idea is that the lines smooths out the noise and finds the underlying trend. The fact that all the data report the same trend (even though they obviously have different ways of assessing Saudi production, since they have different noise) gives me confidence that the trend is really there, rather than an artefact of the badness of one or another production estimate series.
Is it possible that your straight lines are disguising an accelerating trend?
Interesting.
Isn't the 9.5-10 mmbd figure close to the same figure at which the US peaked in 70-71?
Interesting.
Yes, the C+C peaks were very similar, as are the Qt estimates.
Khebab's HL plots put Qt estimates only 10 Gb apart, 196 for the Lower 48, 186 Gb, for Saudi Arabia.
Two reasons for the sharper post-peak decline rate for Saudi Arabia: (1) Saudi Arabia, like Texas, peaked at a later stage of depletion, and (2) Saudi Arabia counted on one field, Ghawar (which Ron and I think is crashing), for half or more of their production.
Hmm. Makes sense, given the US URR of 220Gb +/- and KSA's alleged 269Gb.
another reason for sharper decline, as you have mentioned elsewhere, is the prevalence of horizontals... not so many in the us pre 1970. This new tech will cause world wide production to decline at a higher rate than some expect.
Interesting point. Isn't it also the case that deep water experiences a high decline rate? Do we know what percentage of production employs horizontals?
Will world PO be visible in hindsight? I agree with your and now Stuarts conclusions. I can't get past that "giant sucking sound" of money leaving the economy. Oil price increases will equate to an "energy tax" or a "pay cut" either way both leave less money in peoples pockets.
Add nat. gas, ARM's, housing price resets, it just looks bad heading forward.
Yes...the dots painting the pictures are becoming so numerous at this point that they are becoming lines....and those lines all have a slope less than 0.
Thanks for an interesting and decent methodology analysis (i.e excellent for a website!). This is THE thing to keep the eyes on. It is astonishing that SA is slowing down (maybe true? maybe at least half-true!), russia EXPORTS less, and Norway we know pretty well, and Cantarell is at least in the news. Hmm... I think it's time to prepare, Ive been following peak oil for a year or two, and this is enough for me to ACT 2007.
Time to start considering a lower energy availability the next couple of years. No thourough analysis in the news...incredible.
I go for gold, oil service companies, no debt, companies with resources in "safe" places. US and US$ is gonna take a hit.
The stock markets too in general (UK). It's a strange world.
Good luck and be careful out there. One more peak-oiler believes the first crunch is here.
You should probably put a time limitation on that bet, otherwise you will never be able to collect.
Ha ha.
I imagine he'll negotiate a contract since they'll have to define sustained as well.
Gentleman,
We can create some derivative contracts and I will do this for you for a small fee....much easier, you'll get rich!
Dear Stuart,
Thank you for your clear and cogent analysis and the graphs and numbers to back it up.
It's interesting and makes one sit up and take notice, one also can't help thinking, is this really it? Are these numbers correct? Can they be interpreted in another more benign way?
I'd really like your work to be shot down in flames by someone and in double-quick time! Because, if you are only half-right we are in deep trouble.
If information like this is picked-up by the mainstream media in the current financial climate what happens to the stock market? One thing is pretty certain, the American army will never really leave the Middle East, they are there until the oil isn't.
Actually, it appears US intelligence regarding Iranian oil has finally convinced them there's not enough left to make it worth it to invade. Thus, the new talks. Let us redeploy as Venezuela and Bolivia are in great need of Democracy.
Is this just your opinion, or is there a report to that effect? Please provide a link if so.
Ha...no, it just follows BushCo common sense.
AMAZING!
That is an incredible graph!. I am a scientist and it sure looks like a forced decline. Stuart, this is a news bomb.
Thanks once more for your work Stuart. I truly hope you’re wrong, this is really bad news.
I think you made a your point by showing that there isn’t a concerted production cut by Saudi Arabia, but 8% is a big big number for a decline rate, especially onshore. From the few sources I know Ghawar was supposedly still highly reliant on secondary recovery methods (water injection) just a few years ago, which wouldn’t result in such high decline rates.
As we have talked countless times here at TOD, for a reported OOIP of 720 Gb, Saudi’s ultimate stays somewhere between 190 Gb and 260 Gb (~ 27% to 37% recovery factor). So in fact they can be past the 50% of Qt (midpoint of depletion).
Last year we had news of China returning Saudi oil back to its origin – it was to heavy (or sour) for them to refine. So my reasoning is this: Saudi light crude oil production is crashing, and besides some (who knows how much) heavier oil spare capacity, they don’t have buyers for it.
Saudi Arabia will know invest heavily on pre-refining infrastructure to convert that heavier crude on lighter, easier to sell molecules; later they will probably help with heavy oil refineries abroad. So I think that in the future we might see Saudi Arabia recovering from those 8%, but since we’re talking of lower quality crudes, not enough for me to take that bet.
Twilight in the Desert extensively discusses that the Saudis have been redrilling their fields with horizontal multilateral wells for a number of years. So there is reason to think declines might go fast once they went.
Where is Down Under? I would like his take on your analysis since he seems to have inside info. on Saudi production.
Stuart, your posts are always a treat. Here's someone who hopes you post more often again - and I'm certain that I'm not alone.
Here are two questions:
1) Is there any easy way to graphically compare the rigcount/production decline situation currently afflicting SA with the parallel situation that unfolded in Texas during the 70s?
2) Is there any reason to believe that the 8-9% annual decline rate in SA will become a permanent state of affairs over the next decade or so?
8-9% Will probably look like a great number in a 2 years try
14-30% declines as the horizontal wells water out. Ghawar is probably just starting into serious decline and it will go down hard later. Once Ghawars basically gone KSA decline rates will actually decrease back toward 8% probably and but at a much lower production rate. With so much oil coming out of one field the decline rates of the one field will swamp those of the others.
Maybe WT can comment on Texas oil production since it too had a few large fields the overall decline rate should have matched these fields declining on the initial downslope. The key difference of course is the production profile of horizontal wells vs traditional verticals.
“So that tells us that, given some extra production capacity, Saudi Aramco immediately threw it [Haradh III] into the production mix. And the effect of that? It lifted the plummeting production curve up by 300kbpd, but did nothing to change the gradient of the plummet. That suggests that the Saudis had nothing else to throw at the problem.”
Stuart, you’re one smart hombre.
You have a gift for data analysis.
Appreciate your time and effort.
For me, the lion's share of the credit go to Westexas, Darwinian, Khebab - they have been shouting from the mountain top for several months now about the peak in Saudi Arabia. Stuart has now added some more evidence to their points and conclusions.
MikeTor used the phrase "news bomb" above, and I have to say I agree with him. This looks an awful lot like the smoking gun. I think this is one of the most important articles I've seen recently. WT has said repeatedly that if Ghawar goes into decline, the game is over. This is the most convincing evidence of that situation short of an official Saudi announcement.
Added to Cantarell's woes and the ongoing slide in the North Sea, this looks to me like conclusive support for the stated opinions of T. Boone Pickens, Matt Simmons and Dr. Deffeyes - the peak has happened.
Is there any relationship to the "collapse" of Asian markets (perculating to the world markets) and what Stuart is talking about?
I know indirectly, it's all tied together, but could this all be directly related?
Just seems to be a HUGE coincidence!! Not the release of Stuart's article, but the information he is analyzing.
There will be those who pay attention...
One other question: Is there any reason to believe that SA geography contains dozens as-yet undiscovered fields that are an order of magnitude-to-two smaller than Ghawar (such as perhaps the one recently discovered in the Empty Quarter)? If so, can this be expected to significantly mitigate the current 8-9% annual decline rate over time?
i would guess that that is what all those oil rigs are trying to do, however there is a significant time lag between a new oil field being found and it producing at full capacity. Since the underlying decline rate appears to be around 14%, it is quite probable that new small finds would only be able to prop up the 14 to the 8% we are currently observing.
given that they were shouting about these other fields coming online, i doubt that they have found anything significant new, otherwise they would be shouting about that also.
I guess this is it. As Matthew Simmons noted, "if Saudi Arabia peaks, then categorically the world has peaked."
Oddly enough, today is the day I show my students "The End of Suburbia." I will follow that showing with your post, Stuart. I wish I had releases from my students, I would take a photo of them, and their gaping mouths, and post it.
Thanks.
The calls you get from parents after they ask their kids what the hell happened to them at school that day might be even more interesting.
Oddly enough, today is the day I show my students "The End of Suburbia." I will follow that showing with your post, Stuart.
Could you do me a favor and report back in tomorrow's drumbeat as to the reaction of the students?
TIA
John
I've used EOS in my writing class for three years now. The response is the same: most just get up and leave and open their cellphones in the hallway. There's two or three vocals students during the next class. "To him that has, more shall be given; and from him that has not, from him shall be taken, and that he has."
Hi b,
I've given some informal talks...I enjoy "low tech", white board and pen. I usually draw a (very rough) graph on each board...one of human pop. v. time, and the other of oil v. time (the latter one I say extends five miles out the room, w. the oil "window" being about an inch on the X-axis). I like to ask questions... sometimes begin w. "Why does the pop. curve rise to steeply...about here?" Or, "Have any of you lived in a so-called "Third World" country?" "Have any of you ever planted a garden?" "Have any of you ever had a conversation with someone in their 80s?"
my bet, is this time next week you won't have a job due to one or more complaints by parents.
We had a teacher back in the early 80s (11th grade) who showed us this kind of stuff all the time.
1) we (meaning the students) argued that Nuclear was the answer (like Hubbert did), which he considered objectionable.
2) He never lost his job because of it - even though he supported the liberationists in Nicaragua
3) More than 2 decades later we still don't have convincing sustainable alternatives, while solar and nuclear are still the best alternatives. Ok, wind has made a lot of progress..
Yes I agree. You teacher was remiss in not teaching you all about the Constitution of the United States and the amendments to it. Specifically the one about Freedom of Speech.
We don't lose jobs in the United States for supporting political movements. That is the beauty of this system and a reason to fight for it.
Futhermore you need to reevaluate your teacher's political position regarding Central America. He was on the right side. The Contras in Nicaragua were created by the CIA and were responsible for selling drugs to us. Money to help the Contras came from secret sales of weapons by our President Ronald Reagan to our enemy Iran.
Nuclear is not a 'sustainable' alternative. Certain estimates have the fuel running low in several decades with increased use. Only solar and wind are truly sustainable
pete
The best summary of nuclear power is by David Fleming, "Why Nuclear Power Cannot Be a Major Energy Source", April 06, at
http://www.feasta.org/documents/energy/nuclear_power.htm
From the introduction:
"It takes a lot of fossil energy to mine uranium, and then to extract and prepare the right isotope for use in a nuclear reactor. It takes even more fossil energy to build the reactor, and, when its life is over, to decommission it and look after its radioactive waste.
As a result, with current technology, there is only a limited amount of uranium ore in the world that is rich enough to allow more energy to be produced by the whole nuclear process than the process itself consumes. This amount of ore might be enough to supply the world's total current electricity demand for about six years.
Moreover, because of the amount of fossil fuel and fluorine used in the enrichment process, significant quantities of greenhouse gases are released. As a result, nuclear energy is by no means a 'climate-friendly' technology."
That claim sounds a lot like the ones issued by Storm van Leeuwen et al.
Those claims looked very fishy to me when I read them (seriously, who would assume that half of all uranium enrichment would continue to be done by gaseous diffusion when centrifuges use 1/50 of the energy — and why?) and I learned later that they have been thoroughly and conclusively debunked.
Here's the assay for Saudi Arabia.
The production mix is an important factor, in my view. I think it might explain a lot of what's going on. There's no disputing the data that we're looking at, there's only it's interpretation.
My suspicion has been that they can produce, but not sell, a lot of their crude because it is heavy and sour, as the assay indicates. This is one of the two primary reasons — the other being greatly increased internal refined products consumption — that they are investing heavily in a domestic downstream refinery business.
So, while this analysis certainly has a lot to recommend it, it may not be the whole story. The greater reliance of the world on lesser-quality crudes is a large part of the peak oil story. Saudi Arabia appears to be trying to switch to a "lighter" blend — see Greg Croft's Aramco Projects: A Closer Look. Of course, this article was written before the recent declines, but —
Now, of course, "The Ghawar field is the main producer of 34° API Arabian Light crude." — EIA.So, the lower parts of Ghawar (Arab Light) are no doubt declining and there is a lull in production while Saudi Arabia brings new Arab Light onstream (Khurais) and develops the ability to refine it's poorer grades. Arab Light is easier to sell and they are desparately trying to compensate for declines. Finally, I would never take your bet that Saudi Arabia's production will surpass 10.7 mbd.
-- Dave
The EROEI factor dealing with heavier, sour crude, coupled with growing internal demand and less export volume (per WT's export model) will cause KSA significant budget headaches I would think.
Not just SA's budget. Where in the world are the declines in eroi in SA (sour), in Canada (tarpits), in GOM (deepwater), in Venezuela (gunk), Iowa (ethanol), Iraq (democratization), etc., being offset?
On the matter of a coming spike in the oil price.
I think a price spike, if it comes, will be temporary. Simmons will never get his wish for $200/bbl crude oil. There is an underlying constraint on the oil price, which lies with declining eroi. As the energy intensification of energy production increases, less energy and less investment are available for the rest of the economy. The loss of investment affects the productivity of the rest of the economy, which is the greater part. The increased investment in the energy sector is not increasing productivity in that sector, either.
Falling economic productivity erodes buying power, and so price is constrained.
It is an error to look to the 1970's for guidance today.
The spike in prices then substantially affected many economies negatively. But high prices then were a problem because a great deal of friction existed in the re-circulatory mechanisms for petro-dollars. However, today, this problem has been largely overcome. It still remains a factor undermining the efficient functioning of the world economy, but a much diminished one.
Declining eroi, not high energy prices, provides a more adequate explanation for the economic downturn.
I don't think so but agree :)
The current economy is almost pure bubble and it was created via finical wizardry high commodity prices played a role in pricking the bubble they did not create it.
The greater reliance of the world on lesser-quality crudes is a large part of the peak oil story.
We drank the champagne, Royal Crown, and The Glen Livet.
We are now down to Cooking Sherry and looking REALLLL hard at that can of Sterno...
Say good night Gracie.
John
The further south you get in Ghawar, the heavier the oil gets and the higher the sulfur content. The northmost section Ain Dar, the oil is 34 degrees API and has a sulfur content of 1.66% The southmost portion Haradh produces oil of 32 degrees API and with a sulfur content of 2.15%.
Also the further south you go the average porosity and average permeability drops off dramatically. As a result the Average Productivity Index (BOPD/PSI) drops from 141 in Ain Dar to 31 at Haradh. And the average thickness of the oil column gets thinner the further south you go.
All this means that ARAMCO will get a lot less oil in the south end of the field.
http://www.gregcroft.com/ghawar.ivnu
Ron Patterson
Guys, I think we need to take a deep breath, step back and look at Stuart's numbers calmly and very critically.
I'm slightly disturbed by the reaction of many of the comments relating to Stuart's post. I think they are in bad taste, given the apparent seriousness of Stuart's message. I almost get the feeling that some people are almost, close to, glad for these indicators of a dramatic fall in Saudi oil production. There's no place for glee here! The 'collapse' of the largest Saudi old fields is, if correct, a turning-point in history for our civilization. It's a dark day, a day for mourning, not twisted, perverse, celibration.
Sure, it's tempting to shout, we were right, we were right all along! Still the potentially terrible consequences of being right will be of scant comfort to most of us going forward.
So, perhaps the best thing we can do is expend effort on a rigorous critique of Stuart's numbers and conclusions, rather than greeting them with something close to euphoria.
Re: I almost get the feeling that some people are almost, close to, glad for these indicators of a dramatic fall in Saudi oil production. There's no place for glee here!
No kidding.
I just posted my own analysis of this (in a comment above) and although it introduces a bit of complexity, the news does not appear to be good right now. I am not quite ready yet, as a wag once put it, to kiss my lifestyle goodbye, even though I'm not a heavy car user.
I'm not happy I'm pissed. Pissed because if we have figured this out correctly with limited information then the President of the United States must know the real situation. The world has probably been told the biggest lie of the century by not making this situation public.
And I'm fearful that a democratically elected government thinks it can get away with hiding this information. This means that they don't think democracy has much value in the future.
For better or worse the people should be the ones that decide their own future.
>I'm not happy I'm pissed. Pissed because if we have figured this out correctly with limited information then the President of the United States must know the real situation. The world has probably been told the biggest lie of the century by not making this situation public.
FWIW: "People, we are running out of energy" --Bush 2000.
Yes he danced around the issue with the hydrogen economy etc.
And other statements. On reason I believe we are right is from connecting the dots watching GW's moves. Iraq, Iran hydrogen economy ethanol fiasco Alaskan oil. In total they add up to a government that is very aware of peak oil and expects it to be soon.
The point is the facts need to be made public so the public itself can act.
They need to shoot strait and plainly show the evidence they have and let the masses start digesting the situation. And they should have done this years ago.
As I said my fear comes from the fact this is not happening which means the powers that be think that the opinion and votes of the masses are not important.
You know once peak oil becomes well understood a lot of people are going to look back and say hey you saw this comming how come you said nothing ? I have to think their will be a strong backlash just like the one starting over subprime lending right now.
"Pissed because if we have figured this out correctly with limited information then the President of the United States must know the real situation."
I think Bush et. al. are filth and foolz - especially his handlers (Bush is a low-IQ drone). They knew we were facing peak oil so they stole the election (clear in hindsight).
The gave lip service to our "addiction to oil" early on when proposing the no-go "hydrogen economy" and again more recently the "ethanol economy" (the "drunk" economy).
They needed a Pearl Harbor to galvanize public support for their "war on terror" so they manufactured or at least enabled 9/11. Interestingly, their 20-30 year time frame for their "war on terror" coincided with what will be the most traumatic period of our Post-Peak Transition.
Bush et. al. were incompetent to say the least. Instead of doing actual preparation at home (rail, alternative energy, cleaner coal tech, etc, etc) they instead made Grand Plans, that included invading Iraq, that were later found to be "delusional."
As David Hackett Fischer would say, "Wave Riders mistaking themselves as wave Makers"... or "the keystone cops take on Peak Oil."
I wonder if there is still time enough to impeach Bush for 3rd Degree Treason (and no "insanity" defence allowed - arrogant stupidity doesn't equal insane).
The administration as a whole has certainly figured this out. Bush himself probably isn't smart enough to do it on his own, especially given his unwillingness to read and dependence upon the opinions of a select few who won't tell him anything he disagrees with strongly. This makes him a really good front man, because he can speak the falsehoods and be absolutely sincere about them.
The title of worst president in US history is up for grabs!
memmel " then the President of the United States must know the real situation. The world has probably been told the biggest lie of the century by not making this situation public."...
Read Dick Cheney's 1999 Inst of Petroleum speech? I posted it yesterday and got negative response. He laid-out clearly the scene we see Mar 2007.
Look at this line:
"Oil is unique in that it is so strategic in nature."
Cheney is very literate. If you or anyone does not get the brute impact contained in those 11 words, above, look-up "strategic" in a thick dictionary, that gives its derivation and definitions.
The entire meaning revolves around military generalship and planning at the highest echelons.
Also, "Oil remains fundamentally a government business".
In 1999, he is telling his audience that the seat of the oil business is the federal government's business.
Whether or not you admire or agree with Cheney, he spoke soothe to his insider audience.
Hi reddot,
Thanks for your comment and I'd like to hear more. Do you think there's a way to deal with this? To address "peak"? To put it before the world? eg. "Oil Depletion Protocol". I'd like to hear more of your ideas for positive action, especially in regard to policy.
BTW, I've posted the link to Cheney's speech several times. Still, I appreciate the way you highlight certain sentences. "Brute impact" is an apt description. (Perhaps the reaction was just from the length of your post.) (Or was there more?)
My suggestion: Can you further develop your thinking here? In other words, take your assumptions as givens...Okay, what is possible? What next? What to try?
It's not clear to me what anyone knows or does not know, even if they "know". Lest that sound too much like another "insider" ("known unknowns", etc.), I mean by this that I consider the subject to be emotionally difficult in a unique sort of way (part of the problem.) The implications are (or can be) shocking, when people (in general) have few emotional resources to deal with shock.
In addition, many (most?) perhaps lack the background to have a context in which to interpret "so strategic". And then, there's the conclusion (at least mine), where strategies of the type Cheney refers to logically fail in the end.
Anyway, I mean to encourage you here.
Writerman: Likely a turning point for suburban sprawl. A turning point for "civilization" might need some reliable evidence submitted to appear credible (IMHO).
What would your reaction be if you KNEW that this information was being deliberatly held back from public view by government/MSM/commerce?
Marco.
It's high treason, pure and simple. The deception gives support to our enemies while our own government's policies, promoted by this administration since 2001, increase our dependency on them.
Writerman,
To quote Matt Simmons, if we do nothing to address Peak Oil, "Jim Kunstler will have turned out to be an optimist."
In any case, I have been--relentlessly; repetitively; endlessly--advising anyone who will listen to start downsizing.
http://www.energybulletin.net/19420.html
Published on 21 Aug 2006 by GraphOilogy / Energy Bulletin. Archived on 21 Aug 2006.
Net Oil Exports Revisited
by Jeffrey J. Brown
Westtexas,
I know, I know. I just felt that some people were reacting to Stuart's numbers somewhat 'oddly' for my tastes. Sure it seems almost odd to consider 'taste' and 'manners' when were talking about a truly stupendous moment like this, if the numbers are telling us what we think they are. Perhaps I'm just trying to hang on to traits of 'civilized' behaviour that are going to seem rather 'quaint' down the line.
I too have tried, almost without any success, to spread the word about our difficult position relating to oil and gas. I get absolutely nowhere. Perhaps that's my fault. Still most people I know, just don't get it at all.
Everyone I know is so fucking rich, successful and embedded in our consumer society, that they react like I'm nuts when I raize even the possibility that things ain't what they appear to be.
People I know have never been more affluent. Everyone has bought a newer and bigger car. Built a new luxurious kitchen or bathroom. Two of my friends have bought a new appartment in Berlin on top of their weekend cottages!
It's like their waltzing in a brilliantly lit ballroom to the music of Strauss without a care in the world. Part of this is because they are so damn busy at work they don't have the time to stop for a second and think. When they stop working, they want to relax or party, fuck reflection!
We have to remember that we live in the best of all possible worlds, and technology will almost magically come up with a solution to all our problems. Even our leaders, who may honestly make mistakes and even do ugly things are basically noble and their doing their best.
Sorry for the rant, only I'm beginning to feel the strain of bangning my head against a brik wall!
But that's exactly it: If one bangs his or her head against the brick wall of intractable denial and delusion long enough, then he cannot help taking a certain morbid satisfaction in news like this. One would have to be selfless to a saintly degree NOT to experience a "Schadenfreude"-type emotional reaction like this.
Writerman,
That's just how I feel. Not only are they in total denial that their cushy way of life could change, they always argue that technology will cure it all and there will be no problem. When I point out that we don't likely have enough time for technology to solve it except for a very small percentage of the population, they look at me like I'm nuts. When I suggest they sell their big SUV's unless they plan on living in them, the conversation is usually over -- and by that point I'm glad it is.
My conclusion is that most people are fat, dumb, and happy regarding the crises (yes, plural) about to hit us, and they WANT to stay that way. You can not enlighten someone who does not want to be enlightened.
I'm glad to see that TOD finally got over it s spate of peak oil denial shills and techno-optimists. If folks want to remain fat, dumb, and happy, so be it, just do not try to distract those of us who do not.
"I too have tried, almost without any success, to spread the word about our difficult position relating to oil and gas. I get absolutely nowhere. Perhaps that's my fault. Still most people I know, just don't get it at all.
Everyone I know is so fucking rich, successful and embedded in our consumer society, that they react like I'm nuts when I raize even the possibility that things ain't what they appear to be."
Writerman -
boy you hit the nail square in the middle - they treat you like you are nuts.
I have two schools of thought and they are not firm.
1) You need to tell them so you don't get the "you knew this was going to happen and you didn't tell me."
2) anyone you tell might assume that you made preperations and you will be target #1.
screwed either way imho.
D
Writerman,
There is lot of valuable information and analysis in the lead article and in the comments of others, especially WT, but because you didn't constrain your angle-saxon, it is not likely to find its way into a goodly number of schools.
Surely you have a book of synonyms. If the edit option remains open, why don't you use it.
from what i have seen i think the situation has changed too much to allow us to simply and painlessly go back to 'the way we used to live'
as he promotes.
our population is larger, our resources more depleted, and the earth we live on is not as fertile as it was.
the situation has changed and we have to stumble in the dark to find out how to live because the past is no longer applicable.
I am struggling to see how cities have any value in a post modern society.. Lets see, they grow no food, produce no goods, and suck up a lot of energy. The citizens there will all head to the hills.
It wouldn't be the first time, either. Reading some history (e.g. from Crete up to Classical Greece) yields perspective on something that ought to scare everyone - if we screw up, it will happen in our time.
I also believe that we have the technologies at hand which can push this point off indefinitely (how long have chlorophyll-using organisms been the foundation of life on Earth?). Whether we develop and use them in time is our choice.
Do you mean that we have the technologies to continue using resources, of all sorts, at increasing rates, indefinitely? Or do you mean that you think we have the technologies to put off at least an energy crisis for a few more centuries (assuming everything else somehow holds together)?
Engineer Poet appears to believe that if we choose the right technologies then we can continue to support a civilization of just under 7 billion human beings. Strictly with regards to energy alone, I agree with his answer but his answer is incomplete because it ignores a whole host of other issues, all rooted in overpopulation.
And Doomer Grey would appear to believe that Malthus was right and that the Earth can hardly support the ca. one billion people who habitated it at the time. I agree that the answer to peak oil will not come from engineering/technology alone. But I would disagree that overpopulation has much to do with the causes of the "host of issues". The present large population is rather the result of this very host of issues.
Malthus got confused between cause and effect.
Dearest Grey, hold up the tradition!
You are wrong. Oil is the only reason we have been able to grow enough food to increase our population to this level. Take away the oil, and you probably can't even support 1 billion people. Add to that the damage to the soil and we probably can't even support the population we had pre-oil.
"You are wrong"
And you are God, or did I miss something here?
Most of the essential fossil fuel in agriculture goes in as nitrate and phosphate. Both of these could be supplied by the energy remaining in crop wastes (esp. for maize); the only reason they aren't at the moment is that it's been cheaper to do it with fossil fuel instead of RE. Eprida is generating both fixed nitrogen and charcoal soil amendment from crop wastes, allowing corn to effectively self-fertilize in nitrogen while also sequestering carbon.
When the inputs are measured in pounds/acre and the biomass yields are in tons/acre, you don't even need an envelope to know which way the comparison is going to go.
Last, we could support 9 billion on a fraction of our current land area if we used algae effectively. Those techniques wouldn't even use soil. I'm not sure I'd want to live on the likes of shrimp or crayfish and tilapia for my protein, but it would sure beat starvation.
Fertilizer is not the only petroleum input to modern agriculture. Pesticides and fuel for farm machinery is also part of the mix. What you are saying is totally false. Support 9 billion on a fraction of our current land area? What have you been smoking?
Then tell me what's wrong with my data. Hyperlinks and supporting calculations here.
Note that I said "feed", not "indulge with a Western diet".
That you are both innumerate and scientifically illiterate is not my problem; it is your problem.
During Malthus life, total population was under 1 billion. In fact, as recently as 1930, total global population was under 1.5 billion (most estimates center on 1.3 billion). Yet in a mere blip of 77 years we have increased total human population by 400+% using the "green revolution" to feed those masses, a fact that is acknowledged by every major biologist in the world today.
If you don't understand that graph, see the quote from Dr. Albert Bartlett in my signature. Innumeracy and biological illiteracy are both correctable but only if you wish to correct those personal flaws.
Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett
I'm happy that my ability not to read lets me oversee the inacuracies in your post. Please check:
http://www.census.gov/ipc/www/worldhis.html
1800 (Malthus began writing in 1796):
low estimate (UN): 0,813 billion
high estimate: 1,125 billion
1900 (The Age of oil was just beginning)
low estimate: 1,550 billion
high estimate: 1,762 billion
1930
low estimate: 2.070 billion
1950 (After fighting WWII):
low estimate: 2.4 biliion
high estimate: 2.557 billion
Please read Malthus. His basic observation was that he was doing about 5x more baptisms than funerals..
And Grey, you are doing a very good job of keeping Malthus' tradition!
ps to both: notice that the graph above goes "exponential" well before the carbon age.
Go figure.
The knee in the curve coincides roughly with the Rennaissance and the discovery of the "New World" and also corresponds closely to the beginning of the coal age in Europe.
Let's grant 2.0 billion for 1930. Current estimates show a low of 6.5 billion today. That's still more than trebling the entire population in the space of one human lifetime. You are quibbling about minor details. Human population growth is exponential. It has reached a point where many scientists are now concerned about the loss of biodiversity, soil erosion, water table depletion, etc. It has even reached a point where the Pentagon is studying the impact of overpopulation as a trigger event for military actions.
Just as a note, in case this escaped your god-like powers of deductive reasoning, the carbon age does not coincide with the age of oil.
My original comment was that many of the problems we are experiencing today are symptoms of overpopulation. You argued that it is exactly the opposite - that overpopulation is a symptom of these other things. In fact, let me quote myself so that we don't have you performing further "creative" nonsense in this discussion:
Your response (minus the ad hominem crap) was:
So you are arguing that overpopulation is the result of oil depletion, coal depletion, natural gas depletion, fishery destruction, climate change, deforestation, water table depletion, topsoil erosion???? That's incredibly "creative" of you but certainly gets the cart before the horse and you won't find any but a tiny few (like yourself) who belief such nonsense. Clearly, human population is the driving force leading to fossil fuel depletion, fishery destruction, climate change, deforestation, water table depletion, topsoil erosion and a "host of other issues" that I referred to originally.
But by all means continue with the ad hominem attacks on people. Do that because you have no factual leg upon which to stand and that is all that you can do.
Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett
By the way, which of the exponetially growing populations are you afraid of at the moment?
writerman: I almost get the feeling that some people are almost, close to, glad for these indicators of a dramatic fall in Saudi oil production. There's no place for glee here!
Like it matters what we feel at this point.
Pointing out manners at peak! LAUGH.
Great analysis Stuart. I echo Luis and Chris' comments that its bittersweet news.
To reply to writermans comments above, I have long believed that the early "Peak-Oilers" have some shared mentality with rooting for the underdog in sporting events or similar longshots. They tell their friends the world is close to Peak Oil and everyone thinks they are looney. But with the first datapoints showing they are right, there is a 'relative fitness' algorithm that goes off and internally says "ha -I told you so". The Peak Oil 'team' is the winning team!
Our discount rates are so steep that as long as we can still buy gas and groceries this neurally just represents a somewhat mainstream proof that one was right, hence some of the attitude you see above.
Its akin to someone on the titanic saying 'you know - these ships sometimes hit icebergs and the results can be disastrous', being derided by people at the Captains table (CERAs ancestors) then being smug and gleeful when they hear a crunch. At that moment they are unaware that 12 hours later they will be in a scramble for the lifeboats along with everyone else.
"Honey- come read Stuarts post before you take Kenny to soccer practice - it looks like society may have hit an iceberg"
"Honey- come read Stuarts post before you take Kenny to soccer practice - it looks like society may have hit an iceberg"
Oh god now that is freakin' funny!
I agree that Stuart has done a great analysis of the data.
Nate, I disagree that people are jumping for joy that SA appears to be declining.
Many of us, myself included, looked at the big picture and came to a conclusion that we had a HUGE Problem 2 years ago. Unfortunately you couldn't logically prove this to anyone using production data at the time. We have been trying to convince our associates to take the matter seriously, reduce consumption and invest in mitigating technology. I state mitigating not replacement.
A demonstrated decline, printed in the MSM, may finally push people to reallocate resources to personal and business areas that will help us post peak. Something that has been extremely difficult to commit to when business as usual makes more money (and seems to make more sense).
The world's oil supply will decline with or with PO analysis. The key is our behavior in the face of decline. But most people have to accept that there is a problem before they change, and that hasn't happened yet.
how 'bout the good honest hard working people in the oil business in 1982 that lost their jobs because of the saudi's flooding the market with oil ( alledgedly in concert with bonzo's sitter) ? are they not justified in jumping with joy that the saudi's have peaked ? ............... naw .......probably not.
I have a less optimistic interpretation. I believe there's a significant portion of society--who may be overrepresented in the peak oil debate--who are actively rooting for the end of the world.
As evidence of this, I point to pop culture. Witness the songs, Aenima by Tool and Black Hole Sun by SoundGarden, both of which are basically prayers for the end of days.
May be that most people won't say this in a forum like the Oil Drum, but they can't wait to take the tie off, blow off going to the office and finally use all those guns they've been collecting.
What? But baseball season is just starting... :-(
Baseball is Cricket for those suffering some form of attention deficit disorder.
Sadly, any game using bat and ball unable to last five days and still result in a draw is not really a sport at all. More a "recreational pursuit." :)
Strawman argument.
For every 100 people in the PO forums, there's probably less than 5% who actually think this way.
My guess is most folks on these forums (not just TOD, I mean the whole kit-n-kaboodle) know that sans a lifeboat community (none of which actually exist currently) they are seriously screwed.
Hi Horseman,
2 (cents?) -- re: "I point to pop culture... prayers for the end of days." The kids are in need of connection...that's why they talk on their cell phones all the time. (I think there's an ev psych study in their somewhere - innate number of conversations per hour). They don't necessarily want "it" to end...they want more meaning to begin.
The "end of days" can mean many things. I'm only vaguely aware of these groups, and have no idea what the lyrics are about, but it could well be that the missing subtext is the "end of days... as they are now".
Desire for change is nothing be frightened of.
-d
Yeah, I know what you mean. While this certainly hasn't been enough to turn me into a doomer (after all, 8% of Saudi production is only 1% of global production) I'm looking at that Saudi data, and reading Calculated Risk daily posting stuff like this Bloomberg piece saying that the big investment banks have all had their credit default swaps trade almost to the junk zone in a matter of a week or two, because of their exposure to subprime mortgages. Intellectually, I get that society hitting two icebergs that big at the same time has got to result in personal pain before too many years are out. But the limbic system just won't respond - "nice warm room, interesting work, decent pay, no saber-tooth tigers, what's not to like?".
Eh. If a crash is inevitable, there's something to be said for fast and hard. To use the lifeboat analogy, let's get everyone looking for the lifeboats before the wealthy and powerful fill them up and cast off.
>let's get everyone looking for the lifeboats before the wealthy and powerful fill them up and cast off.
I doubt few wealthy people will sign up to join Eddie Albert (aka Green acres). With the few expections (eg Richard Rainwater) most are convinced that they're money and influence can weather any storm created from declining energy resources. They tend to place themselves on a higher plane of existance and believe they are immune from any pending crisis.
and Stuart what about nat gas?? This is only the oil part. We have some severe problems coming directly at us IMHO.
I'm not sure whether to consider this good or bad news. While I don't consider myself at a personal level ready to deal with the inevitable upcoming crisis, and in that sense don't hope for an imminent crisis, I just might have to consider an earlier Saudi (and world) oil peak "good" news in the long view as far as humanity's future prospects. Why? Because at the point irreversible, relentless decline of net external energy available to humanity sets in, with all of its consequences, hardships and dislocations, and the end of "petroleum man" looms, there is a question that will have to be faced. "And then what?" (Garrett Hardin). With higher levels of resources of all kinds remaining on the planet in 2007 than we will see in any future year, and lower levels of greenhouse gases in the atmosphere, and a lower population level, perhaps humanity as a whole would be in a better place to face the answer to that question sooner rather than later. This may be the case even realizing an "oil crash" is obviously bad for us first-worlders as individuals who are so totally dependent on this unsustainable resource, and the jobs and economic activity made possible only by its existence. In any case it sure looks like we are going to have have to begin living through the painful, long (in the sense of years out of a human life) transition to "whatever is next" quite soon.
deleted
So true.
Let's be frank: most of us on this board and the other PO forums are upper middle class yuppie types. (me too) What percentage of us are even remotely self-sufficientish? By "self-sufficientish" I mean could you surive say 2 weeks with no food or medical services being delivered? Could you go 2 years if deliveries were intermittant?
If what Stuart has written is true - and I have no reason to doubt his rigourous analysis and conclusions - folks 9/10 of us on this forum are completely fucked. Maybe our ability to digest and discuss all the graphs and data bits with academic coldness somehow convinces us otherwise, I'm not sure.
I'm okay in a recession, maybe even a Depression as I'm young, single, have a year of money saved, am creative and willing to work at whatever job comes my way but anything worse than that and I'm totally screwed as I'm only slightly less as dependent on continued deliveries than anybody else. And a 8% decline rate is going to be a lot worse than the Depression.
I'm about to go take as much caffeine as my body can handle, go workout, and hopefully I will have forgotten about this by the time I get back.
Most of us, I would say. Lots of people go years between "medical services." And few Americans would actually starve to death in two weeks, even with no food at all.
But I'm set. I've got tuna under my bed, in case of bird flu. ;-)
You must have a bloody big bedstead. What do you feed them? Sardines from tins?
Do you live in a flat? How did you convince the floor below to accept such a big bucket of water in their lounge? Must be nice having Charlie the Tuna about every single bloody day.
Does he do that line about only tuna with good taste ...
So, when did you get into salt water fish? Stored locally? Stored live? :)
My motto is think Globally and Act Locally. I have been warning many people in Dayton about the future and they have ignored the situation. These people are on the list and will be dealt with in a manner where I will save my Tuna for much later. I want to thank Jared Diamond for providing the solution to the problem at hand.
Hi Greg, sorry for the slur on your character. Funny though, you get to keep your suggestively fascist line These people are on the list and will be dealt with in a manner where I will save my Tuna for much later but any further comment is "purged." Wow. I never minded the noise, guess a skin as thick as light sweet crude is the best we'll ever see 'round here in this day and age.
Best wishes and may those on your list be dealt with in a manner where your tuna is saved for much later.
Yes it was an interesting exchange and I accept your apology. I wondered why you reacted in the manner and maybe your comment concerning fascism should give me a clue. Unfortunately if you interpreted my statement as fascist I feel I am not communicating well; or I misinterpret my own mind.
However, I can see a point in history where I might legitimize, rationalize or justify a path that allows me to take extract judgment from the elected and public figures that should have "known" better.
------------
I have a confrontational style with a chicken little complex, but editing that post was telling as the site is presenting a certain decorum to outside viewers. IMO I want the outside viewers to understand that there will be consequences for inadequate planning.
Ha...I love ya AMPOD...I myself worked out over lunch while watching the DOW slide on CNN and now am sipping some Brandy...soaking up this earth-shattering thread.
Why some of us take this all in a light-hearted, humerous fashion is merely because it is the only way to process such a mind-blowing concept.
There's no place for glee here!
I disagree, at least partially. Yes, it is a dark day for civilization. Yes, we have finally hit the turning point that means our lives will be changed forever.
However, we here have known this day was coming, soon, for quite some time. Many of us have already made some adaptations and some sacrifices.
On a personal level, this is not just a matter of "I was right! Nyah!". This is a matter of vindication of our judgment and the decisions we have made. If someone personally reworks their entire life around the eventuality of peak oil, and then it happens a few years later, they have made a good decision. The sacrifices and missed opportunities that they have accepted have paid off. If, however, PO didn't come for another 30 years, then they made a mistake: they gave up decades worth of opportunities for no benefit to themselves.
(Note that I'm not talking about reasonable conservation measures -- those are a good idea under any circumstances. I'm talking about measures that serious constrain your ability to participate in culture, possibly constrain your ability to influence culture in a positive direction.)
On a cultural level, I think there's a valid argument that peak, now, is actually a good thing if it is true. We've been moving, slowly, towards energy reduction and deployment of renewables. But we haven't gotten really serious about it, so I don't know that a few more years of sub-$100/barrel oil would have done us much good. I am fairly certain that another 20 years of current levels of oil availability would have done us great harm. Skeptics like to say "we've seen this all before; it'll pass, and we'll be fine". If public awareness of peak oil peaks, and yet business as usual continues for another two decades afterwards, the credibility of those calling for major changes, now, will take an enormous hit. We could be left even less prepared than we are now.
Consider history: America responded very rapidly to the peaking of domestic oil and the rise of OPEC. Then the 80's came along. As Amory Lovins said, we spent 10 years learning how to conserve energy, and 20 years forgetting everything we learned. It seems to me that we're much better off hitting peak oil now, during a time of high awareness, than in the middle of the next cycle of forgetting.
Very well said...I myself have both elation and dread at the prospect implied by this very significant post. The psychological barriers to dealing with this issue simply must be faced, or else we really will collapse and dieoff.
Once people shuck off their blinders and stop clinging to false hopes, useful action becomes possible.
That's true only if they don't give up hope altogether. Having a vision to work toward is essential — "When there is no vision, the people perish."
Some of us woke up a long time ago, writerman. Maybe you shouldn't have taken the red pill.
And no, I am not being glib. You are just beginning to grasp what's coming. Peak oil is only part of the entire story. Wait until you really "get it" and see how you feel then.
Sadly, very few are ever going to "really get it" until it's far, far too late and some won't get it at all. For me, it was easier to just go all the way. People who talk about death by a thousand cuts don't even get it.
I believe there is a level at which we decide our own fate, individually, collectively. I'm partial to Kunstler's view that certain locales and communities will be able to transition better, and others are set up for failure. What I find myself taking hope in is not so much a feeling of personal security which is always a bit of an illusion anyway, but in a certainty that the range of scenarios does not include the end of our race however much pain it could involve.
It is discouraging to me to see some of you on this site sort of glib or fatalistic about taking action when you are privy to the facts...but I understand too. There are good reasons why society as a whole has not been able to face the facts as N Hagen's article dove into, and there's only so much anyone can do anyway. I'm a bit younger than most here, no desk job, and I've moved to a small-semi rural town with my wife, near some of her family. A town that might get the Kunstler seal of approval aside from being located in a formerly confederate state. I got no confidence that I'm safe, just a little that I'm doing what I can and that's enough, enjoying each day.
Things could also change quickly for the worse AND the better in the event of the trucking system going kerplooie or whatever...looting, violence, burlary...rationing, neighborhoods coming together, town planning meetings--i.e we can't count out resourcefulness at the moment of necessity. Maybe (maybe, maybe, maybe!) Peak oil is past but not Peak Public Realization - that's still ahead for all it entails. I'll still hold out some hope, best or worst case scenario, and what do we know beyond moment by moment anyway...
cheers
Writer,
You make an interesting point. As for myself I would say I have been 60-40% in league that we are at peak oil. After reading Stuart's post perhaps it is more 65-35%. I am okay with uncertainty, however, this is part of life. Really in my heart I think it is 90-95 versus 5-10% that we are at peak but quite honestly I don't find this, um, “scientific”. My portal on reality is, not to disparage, an anonymous message board detailing events 7,000 miles away from me, about which I have no expertise, involving millions of barrels of oil and millions of involved people. While I accept Peak Oil I remain open that I may be wrong. (In fact I am waiting any moment for the moderator to mention that in fact Orsen Wells is in error and Martians have not landed in Pennsylvania ; )
Nonetheless, some of the arguments made have been based from publicly available, apparently authoritative data, and are stated cogently, rationally and succinctly. Seeing as I believe PO is likely, the more important question is what does this portend? I honestly don't know. How does one do a “Threat Assessment”. Recently, the genetic sequence for the 1918 influenza virus was published in the medical literature. Likely a graduate student with sufficient resources could recreate this scourge that killed 50 million in two years. Heck, maybe its just me, but what about a Barret 50 caliber sniper rifle with explosive rounds a half mile out from a LNG tanker. How does one weigh PO against the arsenal of dangers we face?
There is a (very?) slim possibility that PO will be a net benefit. If it gets rid of those ads for “debt” cards that promise endless freedom it just might be beneficial. Really the question is are people really going to get hurt? I think there will be recession, but at this point I don't know beyond that. I don't buy into the Olduvai Gorge scenario. I could back up the TOD archives on a thumb drive so civilization shall endure --- forgive the joke).
If you really wish to confuse yourself Google Ray Kurzweil. Ray is an inventor who I believe invented the flat bed scanner and more recently has invented a device to assist the blind with written language. Ray feels by 2050 a personal computer will have much greater computational power than the human brain. Per Ray, in the near future we will be immortal and joined with technology. My what interesting times!
P.S. I said I wouldn't contribute if there was censoring on this board, so I am a hypocrite and lied, please pardon me. It has been like night and day since the moderators took back some control of the discussions. I was wrong, good call.
It's also why I came back to TOD after a lengthy absence.
Thank you very much TOD, and special thanks to Leanan, for enduring all that you have.
Heck, the dark day came when there was a realisation that oil is a limited resource, but we continued to use it as though it wasn't. That must have been early last century. If there is "glee" it is only through a feeling of relief that, at last, people will finally get it; that oil is not infinite and that we'll have to start thinking about making other arrangements.
Some people here, though peak aware, appear to want to continue the party for as long as possible, regardless that the longer we party, the worse will be the hangover.
Great post, SS - good to see measured conclusions backed up by solid data analysis (i.e., not over-reaching what the data appears ready to support).
It's especially interesting that IEA's supply graph shows this shape of decline is pretty rare in Saudi production in the last 10 years - only at the beginning of that period (1998) is there a similarly-gradual decline.
Should be interesting to see what this summer brings - provided economic growth is strong enough to provide the demand, we should get a situation in which there is pressure on SA to increase production, so that should provide a nice, clear test of the 8% decline theory and the voluntary cuts theory.
I see another explanation, that I've seen nowhere mentionned, and I'd like your opinions on it. KSA probably has little spare capacity, and may be willing to regain it. But something else may also be part of the truth: if KSA wants to lock the price of oil above 50 or 60$ (and that desired floor is probably going up with time since they have budget imbalances going worse and worse), even in face of an economic recession in the USA (which they may have been anticipating for over a year now), they need to make OPEC production cuts very real.
But I've got a feeling that not many other OPEC member follow them cheerfully on those production cuts. Using some of their cash flows to hog more rigs than they need can be a way to price other producers out of exploration work (those producers will be forced to cut by depletion if they can't drill...)
This certainly can't account for all the increase in rig counts (it started too early, so they must also be drilling more). But it could be a factor in the frantic growth of 2006, which otherwise looks like a real desperate move.
If KSA production cuts are really intentional (to max out cash flow), then time will tell quickly: if any major disruption to supply happens anywhere in 2007, or if next winter isn't so warm, it will again be in their best (financial) interests to produce more because prices will be sky high again anyway...
Pierre
I would think that we would see cutbacks in production and then market flooding and drop in oil prices in a few years as expansion projects like Athabasca Tar Sands come online.
This estimate is probably more accurate than what Saudi Arabia is reporting, which means there might be more oil in the Canadian tar sands than SA. OPEC will probably want to cut back production until the Suncor/Shell expansion comes on line and then flood the market to drop the oil price below what they can produce crude at from the tar sands.
The figure of above $50/bl is cited as being the level at which these tar sands become economically viable. But what has not benn factored in (and cannot be accurately prediced) is the effect on the price of natural gas that this project would cause due to the high energy input requirement of harvesting this stuff.
The EROEI is horrible compared with that of Light Crude.
Marco.
IMO two factors have affected the price of Natural Gas in Western Canada.
GWB and his ethanol speech caused a lot of planned U.S. soy bean acres to be converted to planned corn, which drove demand for NH3/Nitrogen fertilizer up and the planned increased usage in the Tar Sands.
Although a sizeable portion of the gas in Canada is in Saskatchewan, it is traded on the open market. SaskEnergy is pushing for a general price increase, again. SaskFerco is one of TransGas's largest customers.
All I can say is, if this year had been a hard winter in North America, we would not have made it to spring. Natural Gas would have run out. We probably won't make it through next winter. Natural Gas is required in the processing of tar sands. Forget it, it won't happen. Don't count on the tar sands.
The shortages are more due to extraction, transportation and storage. TransGas has several gas caverns and are building more. I used to work for them and toured the cavern near where I live.
I specifically worked on the Gas Nominations system, and the large non-critical customers have to nominate gas usage on a daily basis and are only allowed percentages if storage volumes are low.
I would assume the problem in the Northern U.S. is lack of gas storage and the transportation system cannot handle the cold weather spikes, not a lack of untapped Natural Gas (at least not yet anyway). It cuts into profit margins to construct gas caverns and compressor stations.
The tar sands are going forward. I would imagine the EROEI is positive and if they run out of gas, they will burn oil. Apparently if they processed all of the tar sands the waste water reservoir would be larger than Lake Ontario.
Honey, we are going to rip up our streets and make gasoline!
I think it is time one of the experts here does a complete analysis of future Canadian production. Canada doesn't get mentioned much, but I understand it is the largest source of oil imports to the US.
Canadian oil production is in decline and, while the tar sands can probably produce syncrude for the next 1,000 years, the rate (dQ/dt) isn't going to be stellar and projects are going to slip. Perhaps just enough to keep the riot squad Hummers (with those ray guns mounted on top) going.
Really good work SS, but now I have a headache.
Sunlight
There is a second constraint on annual Canadian Tar Sands production and that is water availabity. The Government of Alberta is concerned about use of the Athabasca River by the principal tar sands producers.
We covered Canada's 2006 Energy Outlook some time ago while Mordor gets its fair share of coverage via Stoney over at TOD Canada so please join in.
FWIW, the tar sands are quickly becoming a political/environmental wedge issue for the Canadian public as evidenced yet again by a running spat with the new Premier of Alberta and one of the greatest Canadians of all time: Dr. David Suzuki.
The true cost of this resource development has yet to surface and I dare say it's a bombshell for some intrepid reporter for it's not the water or NG usage rates nor the GHG emissions that will shine a serious spotlight on tar sand production.
No, the real story lies in the growing numbers of former and existing tar sand employees who after toiling for years in Mordor's pits for quick riches, are returning home to silently die from a wide range autoimmune diseases and cancers.
Syntec,
Do you have a link regarding these ill tar sand workers?
I have an interest in the link between disease and industrial pollution.
Phineas Gage, MD
Here's one of our stories:
http://www.theoildrum.com/story/2006/3/10/16241/7139
Political/environment wedge issue? Syntec, Sirius CBC Radio is reporting tonite that since the Liberal Party announced they are anti-nuclear wrt the tar sands project, they have fallen to 26% in a new Ipsos-Reid poll. In three weeks, the *pro-nuclear stance* has skyrocketed the Conservative Government to 40%. Almost all the new sentiment is from nuclear tolerant Ontario voters.
Its a wedge issue alright, one that is killing the new French dual-citizenship Liberal leader.
I know the debate has been is it Horthgor, is it Frauddy. I'm leaning to Frauddy. The stupid misrepresentation in the above post is pure Frauddy.
agreed and this capatin america must be the other
As others are keen to point out technology is not energy, you cannot substitute one with the other.
The Athabasca operation is dependent on natural gas as feedstock, it will run out and that will be that. I predict that once the show is over much of once beautiful Athabasca will look as if someone had fought a nuclear war.
As for current prices I suggest to google these words [Athabasca cost overrun].
My original comment regarding the Athabasca Tar Sands was an example of expensive oil projects that attracted investment with the high oil price. I would think that it isn't the only project.
It just looks like a repeat of the 1970's without all of the OPEC publicity. They are holding back production, letting all of the high cost projects move forward and then will flood the market at the inflated price. This will increase their profits across the 5 year span and fold anything that is only profitable on >$50bl. oil.
If you had most of the oil in the world, wouldn't you want the price inflated as high as possible? Wouldn't you want to eliminate competition? The best thing for SA is for everyone to think they are running out of oil, panic and accept $100/bl.
Your suggestion is essentially moronic because it assumes that OPEC could hold back production AND keep it a secret.
I don't care what OPEC says, least of all about how much oil they have left, I look at what they do. And what we see today is similar to the situation in the lower 42 during the 70's. Rig count is up but production is down. That means they're past peak.
exactly. as simmions says.
Lies, damned lies, and statistics.
In evaluating data, you need to look at all the data available and consider explanations that match the data. Everyone agrees that Saudi production is down by 8%.
One theory is that it is down because they are unable to produce any more. That theory fits the production numbers. But it very conveniently ignores a lot of other data.
Theory 2 is that Saudi production is down because they want to maintain oil around $60 per barrel. If theory 2 is correct it means that KSA is acting in their own self interest, and enabling them to pay off their debt. If theory 2 is correct, then ARAMCO is not telling bald faced lies about targetting 12 mbpd production in the next couple of years. If theory 2 is correct then KSA is building a production capacity that will bufffer world supply from interuptions, in particular it would undermine Iran's political influence.
Theory 1 focuses in on a subset of the data and extrapolates it out as if geology is the only factor affecting production. Im sorry, but it just doesn't hold water.
Dave Cohen and Robert Rapier are voices of reason. It is no coincidence that when I look over to the right of my screen I see them listed under Senior Contributors.
Are you actually attempting to imply that Stuart Staniford is not a voice of reason? He is an editor here and was writing for TOD long before they were. The Saudis say they are restricting production for their own reasons but what they say does not match their own actions, which is Stuart's point. They claimed to be making specific cuts at specific times. This is clearly not what occurred at all. It is this curiosity that raises the question of whether they are telling the truth or not. As others have pointed out, they may even believe what they are saying. Texas and the US surely believed it for the decade following US peak but that did not alter the fact that we had peaked, did it?
Like so many others making disparaging noises about Stuart's analysis, you bring no hard data to the table, instead turning to "higher authority" and implying that this assessment is irrational by calling the contrary position "voices of reason".
How about trying to refute his data? Or is it because you can't?
I have no intention of refuting Stuart's data, I believe it to be accurate. What is in question is not the data, but rather the cause of the production decline.
My analysis of the data, when you include economic and political considerations, is that there is not a convincing case that the Saudis are geologically constrained. The truth is that none of us knows for sure. I could be wrong.
But yoiu have to ask yourself which is more likely. (Occam's Razor I think the arguement is called.) Is it more likely that a particular decline is a geological peak or voluntary reduction. I observe that there have been many declines in the past caused by reduced demand. I also observe that the Saudis have publicly stated that they want to keep prices above $50.
One of the interesting things is that we might both be right. It might be true that the Saudis have more production capability today, and it might also be true that they will never produce at a higher level in the future. As the swing producer, the Saudis have swung down production because of oversupply. But they are still producing at a healthy clip, and their fields are still depleting. Oil demand growth is being slowed by higher prices. By time demand asks them to increase their production, they may no longer have that ability.
I don't see evidence that the Saudis are at peak today, but even ARAMCO is claiming they will peak in 2 - 5 years, it's not far away however you look at it.
Then I suggest you read Stuart's article again. He lays out the evidence and the mathematical reasons why the decline doesn't look to be a series of deliberate cutbacks.
There is certainly evidence so I don't know why you say that you don't see any. What you may mean is that it is just a coincidence that the decline gives the impression of being geological in nature. For that (the coincidence), there is no evidence.
The debunkers sure appear to be out in force since Friday.
They are down to the "Meet me halfway" argument as they have been totally shot down for two days. Good Work.
It's interesting to look also at the Hubbert Linearization using the last EIA estimates:
Compared to other forecasts, the logistic predicts 2007 production around 8.4 mbpd but the 2006 drop suggests a more rapid decline as Mexico is now experiencing.
Somewhere I'm hoping the recent declines are voluntary cuts because the consequences for the world economy are just too grave especially with Russia's production cooling off. What makes me still skeptical of a crash scenario are the stockpiles still at record levels and historically Saudi Arabia (an OPEC) has always tuned their production quotas according to inventory levels. 2007 will be definitively an important year!
Are there some missing charts?
thanks! the images were in my cache but not on the server :).
These are null charts. Use your imagination.
Khebab,
I ran 8.8 mbpd at -8% yearly came up with 5.33 mbpd in 6 years(?). Is this really going to unfold this fast?
The implications are indeed serious.
Like I said in a previous post its probably better to look at Ghawar's drop different from the rest of KSA. So assuming Ghawar follows a Burgan/Canterell like profile we should actually see a initial steep drop after decline sets in. I'm guessing this is late 2007-2008 this drop will be 14% plus for Ghawar alone leading to a overall decline much higher than 8% for a few years. Once Ghawar settles in producing with a 90% plus water cut the decline curve should flatten again. So I think we will see 5-6 mbpd not in 6 years but in 2-3.
Actually you probably can plot Mexico's production profile which should be similar once their big field collapses then they should steady out.
Someone prove me wrong but in my opinion when Ghawar collapses it should be fast and furious as whole regions of horizontal wells water out at the same time.
You're probably right, we can draw some parallels between the situation with Mexico/Cantarell and SA/Ghawar. If Ghawar is in fact crashing, the decline will be quite severe. If we believe this following chart from Michael Smith:
The brown area in the middle should represents Ghawar that is producing around 4 mbpd in 2005. Smith is predicting a decline in Ghawar production around 2007-2008 but the decline seems relatively gentle (3-5%).
Wow, did SA really get down to nearly 3 mpd in the 80's?
Yup, it really did.
Saudi Production, C+C, thousand barrels per day.
1980...9,900
1981...9,815
1982...6,483
1983...5,086
1984...4,663
1985...3,388
1986...4,870
1987...4,265
1988...5,086
1989...5,064
1990...6,410
1991...8,115
1992...8,332
Ron Patterson
That's even worse and khebab is (mostly) agreeing! I wish it wasn't so, this is very bad news.
Its not completely bad news their is a bit of a silver lining.
With so many of the super-giants going down at the same time and using advanced extraction we probably will see a big downward jolt to total oil production on the order of 6 million bpd or maybe a bit more. Prob over a 3 year period.
But after this we should actually see another plateau in production as decline rates soften and new projects come on line or at least a much gentler decline rate. I believe Bakhtiari modeled this.
Its on a chart here
http://trendlines.ca/energy.htm
I'm sure their is a better graph. In any case he shows the inflection point at about 2015 which is about right. How he got it I've got no clue. Basically about that time the super-giants would have finished the worst of their decline and furious work on post peak projects will be coming on stream slowing the decline rate.
I think we may actually flatten a bit earlier say 2012-2013
But thats just a wag.
So we will face a big shock but even after that we will be given a bit of a second chance to mend our ways.
This is of course assuming that the political situation remains stable during this entire time period which I just can't see happening. I'd say any assumptions about oil production more than 3-4 years out are probably not tenable because of all the external factors.
Bakhtiari? I have his forecast on the Figure below.
Forecasts by PeakOilers based on bottom-up
methodologies. details here.
Cool thanks notice the curve change on the graph about 2011
this is a better graph it fits with what I was saying.
The first half is the crashing super giants + others then the rest of the fields decline. He is right on.
How did he figure this out ?
It took me forever to grok this. In any case notice that we get to hang out at 2001 economic levels for a bit. Not long but we have 2-3 years of semi grace. My reasoning is their is a lot of waste in our economy so most of the first half of the decline can be absorbed in economic contraction and conservation down to about the 2001 level. Below this we will see real shortages develop. So we have almost to 2014 to get our ducks in a row. About 7 years.
I think I mentioned here about 6 months ago that Bakhtiari's curve looked the best fit of all those shown by Khebab. I don't know how he figured it out either - maybe he knows a lot more than he's telling. Yes there is a shoulder, but it's a horribly steep decline for the first few years. I expect it will knock hell out of most western economies, but will at least get the reality acknowledged.
agreed, will it be inflation or deflation?
D-
I think it will be Stagflation.
No economic growth coupled with rising energy costs rippling through the economy.
The shoulder implies insider information.
It because the super-giants are going to collapse at about the same time this includes Ghawar.
I guess I'm a bit of a bigot being American now I think that Iran also has excellent intel on KSA situation. A bit of a duh moment. But it stands to reason that a lot of the Shiite moslems in KSA are willing to report back to Iran. So I suspect they also are privy to insider info on the real state of oil production in the ME.
Kinda puts a new light on their current antics. So not only is GW posturing indicative of peak oil now and a crash but so is Irans.
I dare say a lot of things fell into place once I saw this.
Can someone suggest a stronger acronym than TSHTF that passes censors.
TSITMOH ( The Sh*&%$t's in the Microwave On High )
I think the manner in which the world markets act this week will be very telling about our current situation. Does China see the writing on the wall? Will they make some overt moves that show they are pulling out of the "globalization" game?
If world markets continue down throughout this upcoming week, I think we are in serious trouble fast. If world governments have managed a way to stop the slide and hide the deterioration a little longer, then people will sigh relief and slowly go back to business as usual, albeit shaking their heads saying, "What the hell was that all about?"
The thousand cuts are stacking up, one by one.
Thank you Memmel - there are a couple of paragraphs and graphs at the end of the Monthly Report that I found at your TrendLines link that present a much different picture of what has been unfolding in the Kingdom.
If the decline is confirmed by a bunch of KSA production figures six months from now, then the proof is in the pudding. But it looks like there is an opposing view out there that is well founded on inventory and demand (or lack thereof) data. The picture painted by the latter group makes sense.
The contrary view flies in the face of the billions in contract announcements since the year began. Rigzone, OGJ and UpstreamOnline introduce new expansion plans every week without fail. It boggles the mind to believe this is the smoke and mirrors ploy that some at theOilDrum are implying.
I agree that the hubbert linearization supports the idea that the Saudi's are post peak, but tends to argue for a much smaller decline rate than the 2006 data suggest. However, I'm a bit wary of this linearization since there's such a large deliberate throttling back in the 80s. Also, I am inclined (without certainty since we've never managed to substantiate this theory) to the view that when HL works its because of being a robust estimator for an approximately Gaussian process that arises out of a large number of fields being combined together (since the logistic is clearly a lousy model of individual field profiles). So I'm wary of it again in KSA because Ghawar is so dominant.
A way to reconcile the two views might be to argue that the Saudis have been badly overproducing their fields in recent years, which is why the trend has been above the logistic, and we are now paying the price in a rapid dropoff.
I agree. I think the Ghawar decline should be modeled separately and not within a global HL as above. As in the case of Mexico, the HL seems too optimistic (for once!) and is unable too catch up with a rapid decline of one of its dominant field.
This is why I have been speculating for a while about a future rebound in Saudi production, albeit to a level much lower than their peak.
What we may see is a very sharp decline, because of a crash at Ghawar, followed by a rebound as some smaller fields come on line.
Exactly.
The super-giants warp everything sort of like a black-hole :)
Once they are gone we should still see them producing a respectable amount of oil Ghawar at 90% water cut with advanced extraction may stay over 1 million bpd for a long time but your really just washing a lot of rocks at that point.
Note that we actually settle fairly high after this since we can assume a very aggressive strategy throughout the world to extract oil. And to some extent cost will not be a factor.
The crashing of the supergiants means peak oil but its not the end of the world. Its probably the end of suburbia at least as we know it.
Slightly off topic I suspect that the combo of recession current housing crash and peak oil will make a lot of suburban houses very cheap but I think that the local and state governments will be so starved for cash they will tax the hell out of the remaining home owners.
We are seeing a dip in asphalt prices now.
http://www.dot.ca.gov/hq/esc/oe/asphalt_index/astable.html
But expect the cost of maintaining these miles of suburban roads to be a real issue of the next few years.
The problem is no matter what the cost is for the homes the infrastructure costs for suburbia and of course commuting costs are rising. You have no choice but to significantly increase taxes. It might get so bad in some areas that the houses are basically free maybe owned by the local government you just have to pay the taxes.
memmel,
what are the units in this california DOT graph?
Dollars per 100 sq ft?
dollars per 10 sq meters?
The website doesn't indicate the units.
Per ton I believe. I'd guess that a ton of asphalt is like 4-5
barrels of oil so its selling at around 40 a barrel or so ?
I found this.
Bitumen
1 metric ton = 6.06 barrels = 963.46 liters
And
1 metric ton = 1,000 kilograms = 1.1023 short tons
or
1 short ton = 0.9072 metric tons
So 6.06*0.9702 = 5.88 barrels
So with a price of around 300 a ton you have 51 dollars a barrel. Its worth noting that this material is quit similar to the Canadian tar sands and they claim a break even price
of 50 dollars a barrel. So the oil sands really need to see
oil around 120 a barrel. Questions the reasoning behind
exploiting them when we could just upgrade the asphalt from
other sources.
The fact that the most worthless gunk is going for around 50 a barrel and has for a long time tells you we probably won't see 50 bbl oil again.
See this its a really good link. Asphalt started signaling peak oil as early as June of 2004. Thats when the price diverged well outside of historical ranges.
http://www.state.nj.us/transportation/eng/CCEPM/PriceIndex.shtm
http://www.techtransfer.berkeley.edu/newsletter/05-4/highprice.php
In my opinion oil prices of around 100-200 bbl are terminal for suburbia since the combination of road maintenance costs and fuel costs will drive suburbia to extinction. Ethanol will not help this situation. Its a one two punch.
Deteriorating Roads
http://www.theoutlookonline.com/news/story.php?story_id=117264117078056600
You can find a story like this for every city in America.
After peak oil peak NG this is the next big problem or it
might actually be the first big problem post peak.
Throw in a little recession and major tax loss from the bursting housing bubble and American cities or at least their roads are already in deep trouble now. Sustained prices above 60 are enough to kill suburbia every thing higher just hastens the end. I think California will be the place that get hit first and hardest with failing infrastructure much less increasing it.
Fascinating - you realize, between this Saudi oil production data set, and your analysis of American vehicle fuel consumption, something has to give, and it won't be in the time frame we experienced in the 1970s and 1980s, where the shocks were followed by the flood from the north - slope or sea, it all went up in smoke.
Sometimes, though more incidentally than not, I wonder if the Bush League really is even more incompetent than you can imagine, after you take into account they are more incompetent than you can imagine. Iraq could be seen as the key to a certain set of problems, both American and British, and they were too power drunk to be able to do anything but jam the key in, and then lacking the coordination to turn it, they just broke it off - and are now gaping stupidly, because this wasn't how it was supposed to be.
If Iraq had worked out, with millions and millions of barrels of oil a day flowing beyond OPEC's control, America could have kept on motoring, and Britain could have avoided certain consequences from its own declining oil production.
Instead, the destruction will likely grow and spread.
I would add, this knowledge isn't quite as secret as it may seem. It is merely that accepting it to be true is difficult for many.
Peak oil is defined by what comes out of the pipeline - looks like that flood of oil just keeps receding on the horizon, an immense reverse tsunami which no one can avoid.
The future is now - and some people thought the later 1970s were a gloomy period.
After observing the 'Bush League' for 6 years I've come to the conclusion that they are far from stupid. They are absolutely greedy and malicious. They intended to create the domestic conditions of increasing poverty to keep wages low and corporate profits high. Low wages have the side effect of leaving young people no alternative for employment other than the military. As far as foreign policy is concerned they require the perception of a world that is more dangerous than it really is which requires a strong military to protect us from terrorism. They only care about the filthy rich so they will continue to finance their propaganda campaign and keep them in power. They look everywhere for places to cut budgets except those that kill Asians and the children of America's working class. Domestically they want to fail because they want people to believe the federal government is inherently unable to improve the quality of life of most Americans. Part of actually solving problems (better schools with real science teachers, health care that doesn't result in 12 year olds dying from a toothache, retrofitting our housing stock with insulation and double pane windows) would require higher taxes on the rich and lower profits for corporations like Halliburton and the Carlyle Group. When you look at their true agenda the Bush administation has been very successful.
Truth is folks, the word "Machiavellian" can be a pejorative or an accolade, it all depends on which side you're on.
At the end of the day, it's all about maintaining The Prince's stability in order to preserve and maintain an economic and social order. f you benefit from that order, you're a big fan.
Go ahead, someone note the irony that Machiavelli's work is called The Prince and is still stunningly apropos of today's politics.
Dear Prof,
When I read The Prince over thirty years ago I felt like I had found a friend. I'd heard so much that was negative about Machiavelli that I was amazed that I agreed with so much of what he wrote, that kind of troubled me.
I suppose it's because Machiavelli pleading to be allowed to return to Florence and get back to work. He's so frustrated that he's out of the loop sitting in the provinces twiddling his thumbs when he could be doing so much more.
What's good about him is his ruthlessly logical analysis of the essence of Power. I don't think he's really cynical or amoral, but rather brutally honest about the world in which he lived. He is not a utopian. He isn't advocating 'democracy'. He's talking about Power. Power is a subject we don't really like to talk about in a democracy, because 'democracy' implies an even distribution of Power. If, as is the case, Power is not spread, but concentrated in the hands of a relitively small elite, then immediately one has to qualify and start questioning the underlying assumptions and nature of our 'democracy'.
Personally, I think certain people 'diss' Machiavelli because his thoughts aren't very comforting, he's just too damn honest!
I don't think people really 'diss' Machiavelli. The issue is that unless you are "The Prince", you really don't want to live under such a system. I'm actually inclined to believe that Machiavelli was being somewhat satirical, as you said, he really wanted to be back in Florence, not trapped in the royal court.
His ambition was to be back at the Medici court as one of the ministers.
Machiavelli was being satirical. Who say that he intended to return to the Medici's court don't read Machiavelli's biography. The guy fought the Medici's family for a long time. He commanded an army created by the people of Florence to fight the Medici's army. Well, he lose the battle and the war...
If you read "The Prince" you see that Machiavelli make a lot of references to other book he wrote, "The History of Florence". And he say that at the other book he made sugestions about what is "virtue" to a republican system. Not the same "virtues" he advice to the prince.
Machiavelli was a courtier, but his disdain for incompetence is hard to overlook in The Prince.
The sheer incompetence is what is truly hard to grasp when dealing with Bush, Cheney, et al. (already it sounds like an indictment). Though it has a ways to run, it seems roughly equal to the depths of unreality that various European regimes indulged in between 1800-1918.
I don't mean self-enrichment, or even a disdain of any responsibility to the future during one's lifetime - those are human constants, after all.
What still strikes me is how utterly incompetent America's current leadership is, and the fact that this time, reality is a participant. Selling the sizzle is harder when there is no steak at all.
Here is an image or two of politics colliding with reality:
- neatly dead lines of thousands of British soldiers along the Somme front - glorious manhood meeting the industrial age
- the Belgian Congo - at least Portugal had the excuse of African colonies from the Middle Ages, but Leopold's creation was a thoroughly modern one
- Sudan - whether today, or one or two centuries ago - only the addition of the Chinese is a new element, actually - finally, two of the world's oldest civilizations have found enough in common to be forced to actually interact, for the first time in history. Egypt has proved over thousands of years that its interest in the Nile region is paramount, and in the race for oil, the Chinese are left with attempting to import oil from a region no one else had worked profitably for several decades, as governance essentially collapsed (Chad experienced much the same, and as such, is equally positioned in the second tier of inland desert oil producers, though in its case, currently the West's).
Reading Machiavelli is about power - but he lived in an age before technology allowed a fool's mistakes to incinerate more than a city or two, which makes his harshness against sprendthrift stupidity truly indicting.
Great stuff, Stuart, thanks.
Only question I have is RE the rig count. What kind of time delay might we expect to see for the high rig count to lead to new production? Obviously, the implication of the question is, if there is a ~2 yr lag between hitting new 'stuff' and shipping it, might we see either a leveling off or even a rise in production in a year or two?
As I have previously pointed out, the Texas oil industry, in response to about a 1,000% increase in oil prices, put every single available rig to work in the Seventies, in the biggest drilling boom in state history, and we succeeded--we increased the number of producing wells by 14% from 1972 to 1982. Of course oil production fell by about 30%.
Note that we have not stopped finding oil fields in Texas. We just can't offest the declines from the old large oil fields.
That comes to about a 3.5% decline per year.
The long term net decline rate in Texas has been about 4% per year, for the overall Lower 48, about 2%. Note that this is net, after all kinds of recovery techniques, 3D seismic, horizontal drilling, etc.
The big difference between Texas and Saudi Arabia is the size of the largest field in Saudi Arabia.
Because of the Ghawar effect, it's possible that Saudi Arabia may have a very sharp early decline, followed by somewhat of a rebound, but to a level much less than their peak.
Well, with all the major oil sources tipping into decline it is a race in the short term: does the world economy dive fast enough to hide the decline or does the runup in prices crash the economy.
The geopolitics scene tells me the number one player is well aware, and has been well aware of the seriousness of the situation for some time now. Afghanistan, Iraq, Somalia and north Africa, Iran under the gun, SE Asia (Wayne Madsen Report), etc. I believe that withon a year or two, PO will be openly conceded by the gov't and used as a justification for its policies.
I dont think this race is fair. The number one player is certainly trying (and succeeding in my opinion) of controlling the price through future option contracts ($5.8 trillion and counting).
I think the idea is to control demand through pricing, instead of letting supply dicate the price. (I.e. if you know what supply you have coming over the next 6 months, you could set your prices higher or lower to prematurely affect demand, instead of letting the lack of supply do that for you in a very volatile fashion). This way some sort of order in the markets can be maintained.
Of course, the trick for the number one player is to accurately judge the available supply he has to stay below...
Just my two cents.
I think some of this is going on but rigging the price of a critical commodity that is decreasing is difficult.
Also each time you rig the game you pay a price next round.
In the terms we are talking about I don't think its all that important.
daved Stuart,the key question is what leads you to beleieve this current year over year production decline for SA is definitly different than numerous year over year declines in the past? SA has had substantial year over year production increases/declines in the past dependent on then current market conditions as is expected from THE swing producer...why is this one any different? daved
Guys, c'mon, saying Saudi is in decline is a *guess!* Just look at Stuart's own wording---in concluding as he does, he's "out on a limb" (some "conclusion"). Why the limb? Why not rock solid *knowledge*? Why not "here is Reality"? Seems simple enough to me: a limb is required when one lacks knowledge of what the real situation is.
We really don't know if SA is voluntarily lowering production, like they presumably did in 2003, not to mention at other times. With only a moment's thought, I can think of one plausible, seriously motivated reason why Saudi would voluntarily reduce production: to keep everyone guessing. And the greater the production decline (amid contradictory statements issued to the media), the greater the uncertainty they induce as time rolls forward.
I'm trying to figure out what the Saudi motivation would be to cover up a decline in production capacity. If they admitted it, certainly that would spur more conservation and alternative energy research, but it would also tend to inflate prices. I have a hard time believing they still wouldn't be able to sell their 8.5M barrels a day, and the price would be higher so they'd make more profit. And if conservation took a bite out of world demand over the years, that would work out too, since their production capacity would be dropping over the years.
So I suspect politics is the answer somehow, but I haven't quite figured that one out. Either that, or their production capacity really isn't dropping as we think it is.
Earthworm, the motive is to forestall development of alternatives, which they reasonably fear will leave oil in the ground .... unsold.
Motive in hiding peak: to prevent a civil uprising against the vastly extended royal family? (And thereby putting the remaining oil resource in the hands of an increasingly anti-american saudi public.)
Marco.
Exactly, and among others, ey?
Earthworm, let me add a qualification. Nobody knows (uncertainty) how quickly alternatives might reduce reliance on oil use (more uncertainty), and to what degree (more uncertainty). The guideword is uncertainty.
I don't think that the model of individual country declines to the current date may be applicable to world oil decline. For instance when the lower 48 US production declined, there were definitely low cost substitutes, i.e., crude oil from somewhere else in world. The current tail end of US production is likely influence by the availablility of cheap crude supplies from elsewhere.
Perhaps a better model of whole crude oil decline is the natural gas production decline in North America since identical export substitutes are not easily available. David Hughes mentions that North America was able to maintain production at roughly currently levels (going on 4 year -- though decline seems likely soon) with vigorous drilling.
With vigorous drilling world crude oil production might be held off for a while -- though prices will have to be remain high. Unfortunatley the problem with drilling like crazy right now is the man and materials and the political situation in countries that do have oil.
The other problem we have to confront and might hamper oil production are environmentally issues.
Although it didn't happen in 2006, it's worth mentioning that an 8% decline rate in Saudi Arabia will usually be accompanied by a greater than 8% increase in the price of oil. This means that for a while, declining oil exports from Saudi Arabia will not mean declining oil export revenue - for a while, their revenue may actually increase in the teeth of the decline.
a very good point indeed...and the 64000$ question is what is the cutpoint where the revenue actually starts declining...it's a ways off yet.
You're right, it is a ways off. It doesn't really decline. Not given the current climate, or price/supply paradigm. It goes up. Their internal consumption would have to increase alot faster than it is.
This is what makes the Saudi voluntary production cuts a no-brainer in many ways. By using their swing-producer capability in a downward manner to the tune of 800,000 or a million barrels per day, far in excess of what their OPEC requirements were, they can manage the global supply situation to raise the price(or underpin it, at least).
Assuming a set cost of $5 to "produce" 1 barrel of oil, and assuming domestic consumption of about 2 mbpd, and assuming Saudi oil sells at a $5 discount to WTI/Nymex, we get the following:
Pumping between 9.2 and 9.6 mbpd at a WTI price of $50-$55/barrel, they get between $105 and $125 Billion in revenue per year. Or possibly lower.
But pumping between 8.4 and 8.6 mbpd at a WTI price of $65-$70/barrel they get between $128 and $150 Billion in revenue per year. Or possibly higher.
The lesson from the last two years, at least, is that as long as they keep the US and the world out of recession, they make more money by pumping less oil. It makes no sense for them to pump more.
If the decline in production is voluntary, why did they triple the number of drilling rigs? Those rigs cost a lot of money. It makes no sense to buy or lease them unless they wanted to increase production or at least slow the rate of decline.
And note that their production continued to decline through summer of 2006 when the price of oil was steadily rising.
In other words, Freddy, I don't think you are right about the decline being voluntary :-)
They tripled their drilling rig count to get them when they're cheap? Seems plausible to me.
Yeah, I used to be attracted by this hypothesis too. But I'm pretty swayed by the way Haradh shows up so cleanly in the production profile. If they were deliberately controlling their production for some purpose like price control, they would just have throttled something else back to maintain whatever the desired level of production was.
I'm in the "I don't know" camp. I think there are too many factors and we don't have enough information. I find it very hard to believe that the Saudis believe they could actually hide whatever is going on for very long if their production is declining as fast as even the moderately pessimistic here believe.
People talk about surges and tank farms. Simmons apparently has said that they used this method to "increase" their production in late 2002 and early 2003 for the runup to the Gulf War. What does it matter, 90 million barrels is gone in 90 days, then you have to refill the tanks. Sure, at a slower rate over a few years, but it is still eating into your actual production. You can only play this game for so long. Sooner or later the jig is up. If they knew about the issue back then, why didn't they triple their drilling rigs back then?
The other thing is we assume rationality, intelligence, and efficiency on the part of the Saudis, so we tend to believe that anything that looks slighty out of place must be some crafty manipulation on their part. This might be correct. On the other hand(in the case of what appear to be erratic production changes that I believe both you and Hamilton have pointed out) these might simply be clumsy manifestations of trying to run the most lucrative, most important single business in the world.
One of the biggest intelligence failures of WWII was the allies not being prepared for what became the Battle of the Bulge. They were completely surprised. Why? Because they knew(and they were correct in their knowledge) that the Germans did not have the men and material to launch this offensive. Hitler launched it anyway. The allies had assumed he would act rationally.
This is an intelligence game. We may look back on this five years from now, whether the Saudis are pumping 5 million barrels or 10, and realize everything we thought we new was wrong and they were telling the truth the whole time. Maybe they are telling us the truth but they have no problem with us believing they are lying. Why? Simple, it drives the price up without them having to do anything. Us not believing them and spending all day arguing about it is free money to them. Them and Matt Simmons.
Saddam Hussein had no WMD, but he convinced the West that he was hiding them. Why? There are theories. I'm not really sure why, but he did a really good job. It didn't work out real well for him in the end, but I'm sure he thought it was the right thing to do at the time.
You and Hamilton have both said the Saudi "narrative" doesn't sound right. That may be so, but maybe the reason isn't because it is lies, but because they don't know how to tell the story. I know they probably have some slick Wall Street marketing guys working for them, but it's always al-Naimi and Jumah doing the sound-bites.
If you take a look at their production profile with the price of crude layed over it and started in say, 2003, you can construct a narrative that would make sense. It isn't necessarily that a narrative doesn't exist, it is that we have preconceptions about how a perfectly rational King Abdullah making all the correct decisions would act along this timeline AND that he is running out of oil and trying to cover it up. This might cloud our vision some.
Maybe they don'thave 260 Billion barrels left. Maybe they only have 150. That doesn't mean that they can't attain 12 million barrels. Or that they have to anytime soon. I'm sure someone will want to argue about that. People argue about anything here. Someone wrote some long thing yesterday about what Jumah meant by 10.7 million barrels, as if it was some mystery. They had to "deduce" what he meant. Like the Saudis care. I wonder if any of them ever read this website. They must get a chuckle or two if they do. "Have Prince Bandar call Condoleeza Rice at once! We must make sure those Americans understand what 10.7 means."
On one hand the industry types say 15 mbpd forever and Trillions of barrels of undiscovered reserves. Then you have the Twilight in the Desert people saying "it's not about running out of oil" but Cantarell and Ghawar are crashing and we'll have 5 million barrels less in 3 years and we'll have wars for oil because there won't be any exports. The truth won't be so dramatic, it will be somewhere in between, and it will take a lot longer to play out.
I think regardless of whether or not that 8% drop you found continues, it won't effect much. Worse things happened to oil supply in the 70's and 80's. Besides, I just heard they can make gasoline out of corn :)
Freddy, you are not half as annoying as hothgar, and not a tenth as annoying as dave. You are a useful guy when you aren't being deliberately a PITA.
Haa...Freddy had no sense of humor...Capt. America is none other than our old friend "Oil CEO"...back from the dead.
I'm not inclined to think so, unless they took crash writing courses.
Neither of those dudes could write and English sentence.
I've been back to this thread quite a few times today - not just to read the replies to Stuart's excellent article, but because I am really keen to read the powerfully wrought counter-arguments.
I want meat, data, facts, shredding analysis proving that what Stuart has written is erroneous, flawed in some fundamental manner. I want his words to be proven wrong!
Alas...
All there is is a sophistic burble from the 'other side'.
If there was any doubt that what Stuart wrote is correct, then the inane ramblings of the weird mob should console everyone. He is right, I fear - and not even the paid stooges can find the datum, the scientific explanations, or peer-evaluated proofs against the conclusion provided.
It's time to get on with it, to prepare for the years of trouble ahead.
I'm afraid the opportunities for analysis may be a little limited in this case. This isn't the climate debate after all in that there are people out there who absolutely know the truth on this.
In the absense of real knowledge, speculation is all we got.
And Stuart is "going out on a limb" as he admits.
The piece is provocative and maybe it needs to be made even more so. It would make sense to rouse the rabble until those in the know can't sleep at night. Or is that too Machiavellian?
Ian the gentleman... :)
Yeah - I was also kind of hoping someone would show up and make me feel much better - like nothing worse was going to happen than losing $1000.
Hello SS,
Have no worries--I am sure Yergin and Lynch are preparing press releases to counter your analysis. =)
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Speaking of sophistic...
Stuart's (excellent) analysis is largely interpretation of a situation based on strongly insufficient data. Demanding that his interpretation be "proven wrong" is demanding a far higher level of evidence from one side of the argument than the other, and hence is suggestive of an inherent bias on your part.
It would be nice to see a quantitative analysis of some alternatives (for example, seeing whether Stuart's analysis predicts "involuntary decline" when applied to the other KSA declines in the last 10-20 years); however, at least from a knowledge point of view, "wanting" the results to come out one way or the other is a recipe for flawed analysis. Let the data tell its own story.
This hypothesis will resolve itself shortly, Pitt, but those with an opposing view are fortunate in that the framing of the pessimist argument is falsifiable w/o intervention.
While the contrary camp must await higher production to prove their side; proof that may take seasons or years. Time is none-the-less on their side. For if the opposing view (8% decline) is to be believed, we will see the results in one month. SA will surely drop from 8.7 mb/d to 8.65 mb/d. In April, their production will be 8.6 and 8.5 in June. A year from now true believers will be cheering a flow rate that is down to 8.0 mb/d.
In short, if monthly statistics do not confirm the decline on a monthly basis, the straight line depletion is challenged on its own merit.
Noisy data.
In another post, I noted how statistical analysis was insufficient to make bold claims about this data. It is, however, necessary - a modest one-month decline is not statistically significant, and so its lack is not enough to refute a decline trend.
Should have enough data to say a little more by mid-summer, though.
For the record, I expect a symmetric "V" based on Stuart's graph that will have a Spring 2007 bottom and rise gently over the next two years; more if geopolitical factors arise.
I sense the noise below the band of Stuart's graph is due to his failure to capture the Neutral Zone activity. But then perhaps the other providers are missing NZ prod'n also. I use 8.7 mb/d for SA based on IEA statistics, not the 8.4 he has chosen.
Your comment is full of "maybes".
I think this is the smoking gun that points to the declines being involuntary.
And as revenue goes up in the short term, in spite of falling exports, domestic consumption continues to increase--the positive feedback loop in the Export Land model.
Just a reminder--an 8% decline in production means a double digit decline in net oil exports.
The following simplistic Export Land model (5% production decline, 2.5% increase in domestic consumption) equates to a 16% per year decline in net oil exports (50% decline in 4.5 years, down to zero in 9 years):
http://static.flickr.com/97/240076673_494160e1a0_o.png
If we see an overall 10% per year decline world net oil exports, we would be looking at a 50% decline in net oil exports every 7 years.
Does it also follow that a larger pecentage of thier revenue's most be used to maintain that declining production? So they might need to get what ever the market will bear on oil to fund thier own operations/consumption while covering thier increased costs?
Jeff, looks like you called this stuff correctly, I wish it felt better for you to know this, you took alot of attacks from H and F. Thanks for your time, hope to see you in Portland.
Thank you Stuart. This is TOD at its best. After a lot of informed (and uninformed) speculation, you have given us a solid piece of information that seems to consolidate the evidence that has been accumulating over the past two years about the actual situation at KSA. This graph, along with the graph showing their rigcount and production, appears to me to be solid evidence for peak. I am scared, and trying to prepare.
If SA is post peak it seems to follow that, like Haradh, the next big offsets to the decline will coincide with new fields coming online.
I've seen some information on Qatif, Abu Sa'Fah, Khurais and Khursaniyah field developments. Does anyone have some hard information on when these will start producing?
Bokken
If you go to Aramco's website, and under Media Center -> News -> Megaprojects, you can get their press releases on the various projects that are underway. They talk about them quite a lot these days. And at least with Haradh, the statistics seem to match what they said about the project itself.
For an alternative view on another website -This is NOT my view
If the world was running out of oil as you think then there'd be no reason why the world wouldn't be stock piling heavy crude - remember that vertually all new refining projects coming online in the next 10 years are able to handle heavy crude. The IEA's forecast for 20m or so is a 30 year one. I have no idea what Saudi's production will be in 30 years and I'd suggest neither do the IEA. God knows what'll happen, oil demand may never get high enough to need the Saudi's to get to 20m.
But 12m seems plausable, especially when you consider that you have this lot coming online before 2010: Haradh +300k b/d, Khursaniyah +500k b/d, Shaybah +500k b/d, Manifa +1 to 1.5m b/d, Zuluf +250k b/d, Khurais +1.2m b/d, Nuayim +100k b/d. Then after that 14m also seems plausable IMO - of Saudi's 260bn barrels of proved reserves 50% are proved developed – the highest value categorisation. When fields are taken offline reserves are reclassified as undeveloped – Saudi is far more prudent than Western oil companies. Switches to horizontal wells allows Saudi to produce at lower pressure rates than historical levels so that reserves can be produced at extremely low decline rates.
So Saudi expansion combined with expansion in loads of other places means you're getting large capacity expansion still for years.
Any comments?
Well, I think in 2006 we just watched the experiment of "David" (Haradh III) vs "Goliath" (Ghawar declines) and it looks like David unfortunately got crushed.
In 2007, we have Khursaniyah coming to try its slightly larger 500kbpd slingshot, but not till the end of the year. Doesn't look like a very even contest to me. Then in 2008 there's Shaybah at 250kbpd. That seems like an even more foregone conclusion. Finally, the real reinforcements arrive in 2009: Khurais (1.2mbpd) and Manifa (0.9mbpd) are huge. But what will Goliath have done by then?
It's worth mentioning that the scale of what the Saudi's are doing engineering wise is absolutely vast. They really are bringing on a series of incredibly enormous engineering projects at very high speed in parallel. It just looks like it's nowhere near enough to replace what is being lost.
Stuart,
As I posted further up David is Goliath. Haradh is part of Ghawar
EnglishBosch, the production from projects listed a way above even what Saudi is predicting. Your list says the new Shaybah project will increase Shaybah production by 500 kb/d, Saudi says 250 kb/d, your list says Manifa is to produce 1 to 1.5 mb/d, Saudi says it will produce 900 kb/d and though both say that Khurais will produce 1.2 mb/d, this is highly unlikely.
Khurais produce 144 kb/d in 1981 then production dropped of dramatically. Saudi then inituated a gas injection program in an attempt to get production up but production never got anywhere its 1981 peak. Now over 25 years later, they think massive water injection will work wonders on this old field and increase production to 1.2 mb/d, (reivsed upward from the 800 kb/d that they announced in 2001.)
Not bloody likely.
Ron Patterson
Someone correct me if I'm wrong, but:
Peak oil is not about the world running out of oil, it is about the world hitting the peak of production with production declining after that. Then there's that nasty little problem of increasing world demand for oil.
I believe most "peakists" accept there is still a lot of oil in the earth. The problem is producing it economically. The easy stuff is running out and we are left with the difficult to produce/refine oil. Therein lies the problem.
The related problems are
1. Exports drop a lot faster than overall production. Countries like the US that use a lot more oil than they themselves produce will have very big problems, quickly.
2. Natural gas is also declining in North America. Therefore, in North America (and probably some other locations) we have two shortages to deal with, almost simultaneously.
If oil accounts for something like 40% of energy production, and natural gas something like 20%, on a combined basis we are up at something like 60% of energy sources with declining availability.
Coal, nuclear, and renewables account for only about 40% of energy. It is hard to see how this last group (coal, nuclear, and renewables) can be ramped up quickly enough to make up for the shortfall in oil and natural gas. There are other issues with this group as well - climate change for coal and waste disposal for nuclear.
Nice summary, Gail.
Stuart quotes Jim Hamilton,
"The first possibility is that the Saudis could still pump 10 mbd or more today if they wanted to, but they are cutting back production and exploring like mad because they put an extremely high value on having 2-3 mbd of excess capacity. If so, the recent price behavior suggests that the reason they would seek such capacity is not because they want to stabilize the price, but because it puts them in an incredibly powerful negotiating position. For example, the ability at any time to flood the market could be used at an opportune moment to undercut expensive alternatives such as oil sands that require an oil price over $50."
This is the concern I also raised at the tail of the last Drumbeat, and that Ron Patterson have been discussing, with Ron taking the position that the Saudi's can't do it. I take the position of cautious blind man! I don't know if they can or not....but,
There is something just too too convenient about all of this.....Saudi Arabia's production comes down, but they are building tank farms, refineries, and added facilities both on and off shore for drilling....the price of oil holds up to help pay for all of this stuff, which is no harm to them since there seems to be very little demand destruction even at $70 per barrel, so the Saudi's know they have room on the upside on price....if the offshore and Khaurias (forgive spelling, I didn't have time to look it up, but you all know what it is, the big so called promised land for Saudi), deliver, they have places to put it and refine, as Mexico and North Sea production slide, and the Saudi's with their vaunted "excess capacity".....
Let's say it straight, if the Saudi's can keep the gun totters off their back, we would all love to be in their position, even if they can't make Stuart's "crude+condensate of 10.7 million barrels or more".
IF, and there is no way to know, but IF they can, they have the Western world by the short hairs.....either way, we are coming to the squeeze, and will know much more soon, one presumes.
Repeat caution: Try, it's almost impossible, but try to be ready for anything....as prepared if oil goes over $100 per barrel as you are if oil goes to $30.....it's a crap shoot....
Roger Conner
Remember we are only one cubic mile from freedom
Seems to me that the conclusion that SA cannot
raise production is flawed. Even if SA has
only the reserves stated by Bakhtiari and
Campbell, their production is less than 2% of
reserves. Many producers including the U.S.
produce at much higher rates.
Great article though.
THe us produces a higher fraction of reserves each year because we try harder... a hundred oil companies, using 1600 rigs, are frantically running each rig 7/24 to squeeze out every possible barrel as fast as they can. The saudis have, indeed, expanded their rig count 3x (while production declines), but they are only up to 54 rigs... their nationalized system will never have as many rigs as we do, and therefore will never run through their reserves as fast as we do.
No transparency and fuzzy math are mainstays in the Oil Bidness. In my 20+ years I have seen the obscene, from selling funky invoices to cover drilling payroll to a CPA going to the railroad commission to find a drilling permit filed that day by anyone drilling a well in order to create an invoice to factor for fast cash. I have seen CEO's cut royalty checks then file them away in cabinets, no one was the wiser until bankruptcy came knocking at the door. I remember this article back in 2002 about KSA found here
http://web.archive.org/web/20021023071539/www.energysecurity.org/edwards...
I do not believe OPEC wants us weaning away from oil until they have sold us the last drop for as much as possible. I am sure they do not want us to believe for one minute that they are not in control of supply and demand.
If Stuart's right, the US will never leave Iraq. Not for decades, at least.
exactly. see my Machiavelli comment above...
sadly, this is all short-term rational behavior.
If Iraq has proved anything it's proved you can't get oil from a nation if the people don't agree. We may stay, but we are never going to get that oil.
Sigh... if the U.S. wanted to, we could seize the Saudi oil fields in hours and the Iranian oil fields in days. And we're getting much less oil from Iraq than if we had simply let Saddam do whatever he wanted in Kuwait and to his own people as long he kept the black stuff flowing, not to mention the half-trillion dollars spent trying to democratize the place rather than just installing a cheap, amenable strongman.
It's sad how paranoid otherwise reasonable people get about this subject.
...And will surely go into Iran.
Thanks again Stuart. We have a great piece of documentation here signaling the most important event of our time.
I look forward to the day that WT's, Khebab's and your work are displayed soon in MSM. (Along with Simmons Deffeyes and Hubbert)
Any candidates or aides out there. TAKE a LOOK. Do not let it get swallowed up in confusing political machinations. With worldwide demand I doubt it'll take til election day to verify we are experiencing a foreseeable train wreck.
"Well, I think in 2006 we just watched the experiment of "David" (Haradh III) vs "Goliath" (Ghawar declines) and it looks like David unfortunately got crushed." Stuart Staniford on March 2, 2007
Hello TODers,
Earthmarines?-- 150 million wheelbarrows & bicycles or 150 million rifles?-- large, contiguous Biosolar Habitats?-- Blackwater Mercs?-- Prince & Gates Four Seasons Eco-Tech Luxo-Bunkers?-- Cascadia and New Vermont Republic by Legal Secession?-- Foundation optimization for the Bottleneck Squeeze?-- Jay Hanson's Thermo/Gene Collision?-- Tiger Woods plowing golf courses for vegetables and ethanol for his Buick?-- Huge migrations from PO+GW?-- SuperNafta?--Hell's Angels' gas-stations?-- "3 Days of the Condor" scenario or Jeffersonian Isolationism?--Google 'unlucky' homepage button?-- Zimbabwe Syndrome?-- Olduvai Gorge?--Pandemic Powerdown by the Bioweaponeers?-- full-on Nuclear ICBM gift exchange?--Machete' Moshpit or relocalized permaculture with spiderwebriders?-- Evolution in the Humanimal Ecosystem for Revolutionary Redesign?
Where do we want to go from here?
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Welcome to the new realism
Bob,
This sounds like an Alan Ginsberg poem ... Maybe a "Howl" for the 21st century?
Or Peak Oil Blues?
Why is this piece not entitled:
The Saudis are lying. Ghawar is crashing
?
Because that would be needlessly inflammatory, speculative, and unsubstantiated.
The data SS presented demonstrates that KSA has declined by 8% per annum (not controversial), but that the characteristics of the decline could be interpreted as being involuntary.
SS builds a speculative case - well, IMHO - that KSA is losing production capacity, and will not be able to substantially increase production near-term for a substantial period. He - wisely - stresses that this is a speculation on his part, based on his interpretation of the data, and is not a foregone conclusion.
Those caveats are a key part of his analysis, pointing out where and to what extent it's reliable, and are a key part of why it's such an excellent analysis: he, unlike many people here, is carefully avoiding leaping to too many conclusions.
OK, I'm firing up the still. Gone fishing and hunting for the rest of my life. Sorry I'll be unreachable, I'll be off the beaten path. Think about it. Yes, civilization as we know it is over. Yes, 7/8 of this planet will die from starvation, disease and war. But, YOUR responsibility devolves to your family and friends. What you can learn and teach them (while the ability to access the infomation still exists) about self sufficiency should be paramount. If you have children, they and their children will live in a world none of us have ever experienced. Think pre-1820 as oil and it's derivitives will not be available. How do you provide for your basic needs if you can't go to Wal-Mart and buy it? We are in a unique position of knowing what's coming while access to the knowledge is still available. Wait til it happens, and the internet will not be available, books in the library will have been checked out and not returned, and if they are having trouble delivering food to the stores, you can bet books won't be. YOU are responsible for YOUR future generations. What YOU don't teach them, they won't know when they need to, and YOUR decendents will pay for it. So get cracking. You have a lot to learn.
Well, I've been into this for a long, long time so I have hundreds of books plus our situation is far better than the vast majority of people. However, one thing I've been doing the past few years that anyone can do is to establish a library of information in notebooks. I use four inch ones. Everything is categorized by subject. I also have many books and articles on CDs. I don't like this kind of information storage but it's good for less important stuff.
Todd; a Realist
Thanks for a great article Stuart. It really put everything into perspective for me. I hope everyone in the world has the same reactions that I and all the TODers have had.
TODers, give yourselves a round of applause. You have earned it. Tomorrow we can get on with the business of Post Peak Oil.
Think of a world that can't afford (and doesn't want) to have wars. That is a goal worth working towards.
On a given day
The waxwing returns
Like a swallow
But not
To Capistrano
On this given day
The waxwing has returned
Are you ready yet?
PS COUGH! (white nationist ecofascism)
I've noticed we've already attracted some trolls. Interesting that they appear to be unable to formulate a rational position. I guess you must have to have a deminished intellectual capacity to even question the reality of we are faced with.
When accusing others of diminished mental capacity it would be wise to spell words correctly.
A few points:
I posted this in the Drumbeat but according to Reuters the OPEC decline continues apace:
''Also limiting oil losses on Friday, output from the Organization of the Petroleum Exporting Countries, excluding Iraq and Angola, fell in February, a Reuters survey showed.
The 10 OPEC members that have to comply with production targets pumped 26.63 million barrels per day (bpd), down 290,000 bpd from January.
Lower supplies from OPEC - the source of a third of the world's crude - has helped boost prices from a 20-month low of $49.90 in mid-January.''
Thats from a CNN article. Now I dont know where Reuters is getting its Feb info from but if true I would guess that most of that decline would be from SA - since if you look at the EIA figures for late 2006 almost all the OPEC decline thusfar had been on SA's shoulders. Its a jump but it would suggest SA's decline continued in Feb.
Secondly about Haradh and its 300,000 having a small initial effect and then its effect being overwhelmed - wouldnt this suggest that the Gwahar decline rate is actually OVER 8%? Seems to me if you throw 300,000 extra bpd into the equation and the decline continues despite this back to a level of 8% then the actual prime mover for the decline ie Gwahar must be tumbling at a rate greater than 8%. Is this really likely?
Lastly does the SA decline (ie it seems to me pretty constant and measured) matches previous decline episodes from around the world? Would we not expect the graph to jump all over the place rather more? Is there not something rather controlled about the apparent decline?
I think its great work Stuart and very thought provoking, but I believe the acid test is still SA's response to an oil supply shortage later in the year. Can they raise production again if $70 oil comes again? The ironic thing is, the way the debt and liquidity chickens are coming home to roost we may not get this test of the model for some time, if demand takes as big a whack as seems likely!!!
From Stuart's article where he draws two trend lines (before and after Haradh came online) of the averaging of all 4 reports, they have about the same trend line, and specifically the article includes: "It also suggests that last year's underlying Type II decline rate, before megaprojects like Haradh III, was 14%."
Gwahar has been reworked with many horizontal wells. While the horizontal wells allow large volumes of extraction, when water encroaches, it does so quickly. Cantarell is declining at 20% (http://www.theoildrum.com/story/2006/7/12/10421/4972), so the fact that Gwahar seems to be declining quite quickly isn't too much of a shock. There are many comments that the decline might even increase for a short time.
Hello TODers,
Check out the sitemeter: approx. 20,000 unique visitors and climbing fast, page views much higher than normal too. Yeee-Haaaaaaa! How long before we catch up with Britney Spears and Anna Nichole Smith?
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Hello TODers,
If you check out TOD visits by country:
http://www.sitemeter.com/?a=stats&s=sm6peakoildrum&r=83
The third biggest visitor is 'unknown country"!
Is this CERA, CIA, NSA, MI-6, KGB, DOE, USGS, EIA, etc?
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Toto: I was surprised to see that Canada has the highest per capita viewership of TOD (exceeding the USA).
its not showing for me. what am i missing? all i get is a colorfull "x" in the left upper portion of the body. everything else loaded up. except where the pic/graph should be.
Not yet Bob :)
http://www.blogpulse.com/trend?query1=Britney+Spears++&label1=&query2=An...
(but we better smarten up fast)
It may be pointless to join the amen chorus, but thank you anyway, Mr. Sandiford, for providing for free these priceless observations so cleverly teased out of such sparse current data. The Shadenfreude I read here feels like a fear response in my gut.
What I want to know is not how to farm, but what TPTB are going to do now. Surely they'd prefer a nice, warm war in SW Asia to cold, dark nights here at home before election day. Is it also your opinion that Iran is too depleted and underdeveloped to make any difference to the coming shortage and its attendant economic meltdown? Or is this the right question?
Of the 210 countries on Earth, only 35 consume more oil than the Pentagon. Economic crisis or no, that supply has to be maintained. So isn't the Iranian crude "worth it," even if it takes decades to fully exploit? By the time it comes on line, it'll be priceless, no? Likewise the apparent fumbling of Iraqi production - Why waste it now when Nigerian crude can be had for worthless US scrip?
SA remains the big prize. But's it's not the next domino in line, is it?
There are lot of assumptions on this thread that Stuart's analysis is correct and that Saudi Arabia's oil production is crashing. I had read Hamilton's recent post, and he raised a good point — it would take one hell of a conspiracy for all this to be true.
How believable is it that
I find all of this implausible. There has been no discussion on this thread (or little, I didn't look at every comment) that KSA likes to think of itself as a "swing" producer with influence on the oil price. In fact, their production over the last years is like a yo-yo. On the other hand, there's a lot of self-congratulatory doomerism on this thread, and that indicates a lack of critical examination of what Stuart says, which I assume he would welcome. Equally, lots of skepticism toward what KSA says is also required at all times. I don't have the Ghawar production numbers right here in front of me. Do you?
I have been aware for some time now that the argument between many of the "Peakists" (Athanasians) and the Cornucopians (Arians) is much like a religious dispute, as if we were at the Council of Nicaea.
I am very concerned about peak oil, and I find the lack of discrimination on this thread, and elsewhere on the web, disappointing, to say the least.
Make an effort, people.
Well, that's the point. We don't.
I'm not sure we need more endless debate going in circles over issues that could easily be resolved.
What we may need is a very cranky mob kicking up a storm outside certain embassies.
Hmm, I don't think there was any hint of conspiracy in Stuart's post. He was merely examining the data and drawing conclusions. It seems like a well argued position. If other's think it would take a conspiracy for Stuart's conclusions to be true, then that's their problem; Stuart seems to have stuck to the data. Unless you imagine that an even bigger conspiracy could have carefully manipulated the data from 4 different sources, to make it look as though KSA is in decline?
Nah, it doesn't take a conspiracy, it could just be reality.
Well, it's just about incontrovertable that their production declined by 8% last year, right? And I think it's pretty clear that only a tiny handful of people are even wondering about what that means. So that this could happen and no-one pay attention doesn't seem very hard to believe at all; we are living it.
Perhaps you could get the ball rolling by offering a detailed alternative explanation for the form of last year's production decline, including the 300kbpd bump over.
Re: Get the ball rolling?
Ya' know what, Stuart? I've got better things to do. This KSA uncertainty doesn't affect the peak of oil production one iota, in my view. If KSA is really down, as you seem inclined to believe, it only makes a bad situation worse.
With respect and affection,
-- Dave
Dave Stuart used a method of data analysis that really for experts. It's simple you do a independent analysis and get overlapping consistent results. When you get a strong signal from noisy data with this type of analysis people that do or have done data analysis freak out. The chances of a clear signal like Stuart has offered occurring by chance is like a zilllion to one. If you no stats we can easily do the analysis to determine if the trend is bogus. Its been a long time for me but their are methods to determine if the fit is real.
See
http://en.wikipedia.org/wiki/Linear_regression
and
http://en.wikipedia.org/wiki/Linear_regression#Checking_model_validity
I used to do this stuff and we had a name for validity it escapes me at the moment. But I'm just saying if you want a numerical check this can be done and Stuart knows how to do it. In semi plain english its the probability that the fit is real and greater than the noise in the data. f something or p arrgh...
Understand that the cool thing here is if you have data that is independent and you can extract a obvious trend the probability of it being noise is almost zero.
Trust me when you hit results like this with data your spot on.
Stuart needs to show the confidence interval.
http://en.wikipedia.org/wiki/Confidence_interval
And Robert still owes us a error analysis for hubbert fits using pre and post peak data.
True, but irrelevant.
The question is not whether the observed trend is noise - nobody's even suggested that - but rather what is the reason for the observed trend.
And that is a matter of economics, politics, logistics, and geology, not of statistics.
I find it rather hypocritical that, in your personal disagreement with Stuart's conclusion, you call for others to refute him but then claim that you have better things to do than refute him yourself. You are the one that disagrees with Stuart's assessment. You should thus present your response to his position. The rest of us don't read minds and therefore cannot anticipate what response you might have had in mind, nor are we necessarily even inclined to make such a response. If you want that response made it becomes incumbent upon you to make it, not the rest of us.
Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett
Haa...Dave, I hate to say this, and it is a bit ironic, but some of the strongest dissenting voices were recently banned.
What is your gut telling you here? In lieu of the hard data out of KSA, what do the indirect data points show us? More and more, those data points from different viewpoints are honing in on the same conclusion.
No one with a demonstrated capacity to form a rationale argument based on an analysis of the available information was banned recently.
Disruption is not dissent.
Untrue, and a cheap shot at people who you know can't respond.
Both Hrothgar and Freddy had provided clear and well-written arguments at times. At other times, they had ranted, baited, insulted, and disrupted.
That they were banned for the latter doesn't mean the former wasn't true.
Dave, Saudi has not managed to conceal their situation from the world. Simmons wrote a book announcing that fact that fact that has sold over 100,000 copies. So at least that many people know about it. And I would say that the peak oil community is even larger than that.
That being said, you know as well as I do that everything in Saudi is a closely guarded secret. They tell no one anything. But they say that they can produce 10.7 mb/d of crude oil. Okay, who do you believe? Do you just take their word for it?
But if you examine the facts, as Simmons did and as many on this list have, the preponderance of evidence says they are crashing. They are drilling like crazy and even go deep into the Rub al-Khali, one of the most inhospitable places in the world, for a very tiny patch of oil. Now I ask you does this sound like someone who is sitting on over 260 billion barrels of oil?
What I am saying Dave is their actions betray them! And they have only managed to keep the true knowledge of their reserves from people who really wish to believe what they are telling them. Hell, they are preaching to the choir.
But let me ask you a question. How have the cornucopians managed to conceal from the world the fact that world oil will soon peak? And why does hardly anyone seem the least bit concerned about the possible terriable consequences of this fact.
Now do you get my point.
Ron Patterson
I'll take a stab.
1. Assuming this is true....
2. KSA higher ups, the political bigwigs believe their own BS. Look at the US govt. for a good example. Do people in high places in the US govt. think we are close to peak oil? Do they think we are in deep doodoo in the energy realm altogether? They sure as hell don't show it if they do think this. Because they believe their own BS and that of the paid shills (CERA, et. al.). Same thing in KSA. Why assume the Saudis are any more astute about the energy situation in general and the oil situation in particular? They probably have their own 'cornucopian' choir singing to the royalty and the royalty probably believes it because they want to believe it and because it has worked for over 60 years.
3. Nobody knows squat. We all go on what data we can scrape up and the analyses we apply and the assumptions we make. It doesn't take any kind of conspiracy at all to end up believing this or that about Peak Oil. You follow your 'facts' I'll follow mine.
Sorry that things can't be more clear cut. Get used to it.
Oh yeah. I find Stuart's post very informative and thought-provoking because it takes existing data that everyone has access to and looks at it in a different way, a way that offers insights that I, for one, had not thought of before. Somehow the conspiracy angle you bring up seems off-the-wall.
I totally agree that people believe their own BS. It is even stronger if you are an officier of an organisation with an instituational idealogy. I've been involved in the Energy Debate here in Australia for a while and it's incrediable how people with Ph.D.'s can't seem to understand simple equations.
It's not that they can't, it's that the equations tell them stuff they don't want to know.
Group Think is powerful force. I can easily believe that Group Think in SA ensures that People in Charge believe they have 10.7 MPD capacity.
And stronger yet if you're a member of a vocal but marginalized and misunderstood minority that is telling the world things it "needs to know" but that most people "can't understand" or "won't accept".
Absolutely.
I'm maybe a bit naïve, but how come that no one have put real preassure on KSA to "publish" their facts? What have they done to get away with all this hush-hush regarding one of civilizations most important statistics?
My sense is they would keep the swing producer illusion going even after the spare capacity evaporated. Imagine the domestic repercussions once it is clearly demonstrated the Royals have squandered the 'gift' forever. Where is the benifit to the everyday citizen?
In this light the implications of Stuart's work have large consequenses internally for SA. As noted how will they split up the limited resource? Keep us happy or placate the one holding the the knife or the IED.
In this vein it is impossible for them to comply with Simmons's requests. Even more so if they can see the bottom half of the tank.
Right on the mark, Dave. I mean, really, a bunch of people vying for mention in the history books as the first to announce that peak oil has arrived (I include Campbell in that group). I think that's the meaning of Stuart's "pronouncamentio limb."
Worse, yet, are all those who then flock in to get part of the action.
Stuart, I'll bet you $10,000 Saudi raises its production above eight five.
Hi African Person,
Hope they're not paying you for this deeply insightful comment, are they?
I wouldn't bet against you that they might achieve that level in the near future (some series still show them above that). But if you wanted to bet further out, I might go for it. You have to a) reveal who you actually are in the real world, and b) bring the stake back down to what I said.
I'm a Vancouver lawyer who owns a small oil company with assets in Western Canada.
Stuart, isn't that precisely the issue? Assuming Saudi can raise production above eight five, or even nine or higher, how long can they sustain that production level? The point of my question is to illustrate that if we actually knew what was happening in Saudi, that question could be answered within a specifiable range of uncertainty. As things currently stand, that question cannot be answered. I challenge anyone to answer it verifiably.
To the poster who asked how much I'm being paid by the industry for my views, my answer is zero. I see a lack of critical thinking in this thread on the most critical elements of the discussion whether Saudi has peaked. So far as I can discern, we lack the most basic information, including overall reserve and depletion numbers, to allow us to confidently say Saudi decline is incontrovertibly here. We have that confidence with the North Sea and with Cantarrel. Most of the posts in this thread exude a certain urgent feeling based on *belief* ("do you believe in peak oil?") and contain no information whatever (except information about the poster). Most people, I find, who talk about Simmons' work miss his most essential, basic point, which is that we need data reform to actually tell us where we are (for those who missed it, Simmons---the guy who probably has among the best grasp of the numbers---is saying *we don't know*). Few people worth listening to dispute peak will happen. The only question, in most peoples' minds, and in mine, is when peak will occur. Stuart says Saudi has hit its peak. That's a total guess supported by ambiguous observations (I hesitate to call them "facts" because their meaning is so debatable).
A key fact: On Khebab's HL plots for Texas and Saudi Arabia, Saudi Arabia, in 2006, was at the same stage of depletion at which Texas started declining, in 1973.
The following graph is based on the foregoing observation:
http://static.flickr.com/55/145186318_27a012448e_o.png
Another fact: Saudi Arabia showed declining production at the same stage of depletion that Texas started declining.
Another fact: the Saudis have dramatically increased their drilling.
Another fact: the Saudi production decline corresponded to the highest (nominal) oil prices in history.
So, in Texas, in 1973 we saw the following:
Higher Oil Prices + Increased Drilling = Lower Crude Oil Production
In Saudi Arabia, in 2006 (same stage of depletion as Texas in 1973), we saw the following:
Higher Oil Prices + Increased Drilling = Lower Crude Oil Production
Well, then, with that equation supporting you, take my bet. $10K.
If I were to place a $10K bet on Saudi production--and thus oil prices--it would be in the futures markets, the payoff would be vastly better.
In any case, I am "fully invested" in oil. We presently have three rigs drilling on my prospects, and we may shortly have four rigs.
So you're not willing to bet Saudi production is declining? But isn't that a sure bet? Can't get money risk free on the futures market, that's for sure.
I'll defer to some of the futures experts on this board.
What could one do with $10,000 in risk capital if one wanted to speculate on the direction of oil prices? Can't you buy an option that limits your risk to the $10,000?
In any case, I presented four specific facts not speculation, in support of the 2005 Saudi peak.
By the way, the two examples you mentioned--Mexico and the North Sea--both started declining at the same stage of depletion as the Lower 48, which is where world crude + condensate production also started declining (all based on HL).
I always find it interesting that Peak Oil skeptics (and near term skeptics) frequently cite the examples of regions in terminal decline to rebut Peak Oil arguments.
No. You presented four facts that you believe provide evidence for a 2005 Saudi peak.
None of those facts are directly related to Saudi oil production capacity, and whatever link exists is formed by one's interpretation of the effects of those facts.
You may be right, but the available evidence does not support the level of certainty you appear to have.
Ditto, Pitt.
How do you propose to verify that SA has raised its production above 8.5 mb/d? Is there a way of knowing if the oil they are supplying the market is entirely from daily production or in part from storage?
Are you proposing to bet on one day's production level, one month's, one year's...?
It seems to me, given that geopolitics may force the Saudi's to push production to hurtful levels, that you are proposing to set the bar too low.
Saudi Arabia is claiming a production capacity of 10.7 mb/d. Are you prepared to bet on SA getting to 9.6 mb/d and maintaining production at or above that level for 6 months, without thereafter declining within two years to levels below 8 mb/d?
Those are all good questions, which parenthetically could have been asked in 2003 or 2001, but j'digress. The point is, you're right, is there a way of knowing? Uncertainty has many tentacles.
I am anything but a peak oil skeptic. My best guess is that Campbell's latest estimate probably will hold the day, plus or minus. But I've been wrong about similar such guesses in the past. So has Campbell.
Another fact: Saudi Arabia showed declining production at the same stage of depletion that Texas started declining.
Which was only apparent in the case of Texas years after the peak. So you think that we can do something with Saudi that couldn't have been done with Texas.
Another fact: the Saudi production decline corresponded to the highest (nominal) oil prices in history.
Also the highest inventories - you always neglect that. It doesn't matter how high price is if there isn't any place to put the product. Production must fall. It did, and prices followed, indicating that there was no shortage of product.
Again,
Demand fell, because prices rose, because production started falling in June of 2005. The cumulative shortfall is about 366 million barrels so far.
The 20 months following 5/05 have simply been a process of allocating declining oil production to the high bidders, as evidenced by the about two-thirds increase in average monthly crude oil prices in the 20 months after 5/05 compared to the 20 months prior to 5/05.
BTW, as I noted down the thread, the initial annual decline in Saudi production was 4.2%, very close to the long term Texas decline of about 4%.
We have now drawn down Total US Petroleum inventories by 90 million barrels or so since October, and oil prices are rising. When are we going to see the Saudis increase production?
We have now drawn down Total US Petroleum inventories by 90 million barrels or so since October, and oil prices are rising. When are we going to see the Saudis increase production?
It doesn't matter how much gasoline or distillate inventories get drawn down; only crude. That will dictate crude purchases. And crude inventories are still well above the 5 year average, and they have never even dropped to average levels during the Saudi cuts. The market has been adequately supplied.
You guys would have a better case had inventories actually been drawn down below normal levels. To the contrary, they have remained well above normal levels, and prices have fallen.
I wonder about this 5 year average statistic. To maintain inventories at the same level relative to consumption, wouldn't inventories have to rise continually? They would have to be 9% above the level 5 years ago, assuming consumption growth of 1.8%. If inventories truly are rising, today's inventories would usually be higher than the average anyway.
Are inventories significantly higher than ("well above") what we would expect in an era of rising production?
Oil prices are currently about two-thirds higher than their monthly average in the 20 months prior to 5/05, and from 1982 to 1995, relative to consumption, the US never had less than 24 days of crude oil consumption in commercial inventories (a range of 24 to 34 days), at the end of February.
At 22.4 days, we are therefore below the lowest we saw in the 1982 to 1995 time frame.
"Which was only apparent in the case of Texas years after the peak. So you think that we can do something with Saudi that couldn't have been done with Texas."
Today, there are more examples of regions going through peak production and subsequently declining than were available in the 1970s. This provides a broader base for comparison. Even if it isn't the end-all to the question of KSA's production, doesn't this broader knowledge-base count for something?
-best,
Wolf
It's quite surprising to see your remarks both about price signals, and inventories. I have no doubt your own understanding of these issues is more developed, than what you've presented here. That said, the repetitious citation of Inventories on an Absolute, rather than a Days Supply basis, is something we see most often from people who don't understand the market. Robert Kaufmann's longer-term studies in this area, for example, are telling. Days Supply is the proper way to measure Inventories, not Absolute Supply. This is true in most things, whether it's Oil, or Peanut Butter Inventories at a Military Base whose population is growing at 3% a year. I don't mean to be instructive here, b/c I have to believe I am not telling you anything you don;t know. I just am confused as to why you don't use Days Supply, as the measure.
In addition, your price signal comments appear also as either ignoring or not understanding the effects wrought by contango in the crude oil futures curve. Which also has an effect on inventories.
Front month price is actually a very poor, short-term indicator, and as seen through the lense of volatility, of course is rarely sustainable. By definition, almost. Actual Peak, Recognition of Peak, and Post Peak would theoretically produce all sorts of pricing anomalies in Front and Near month contracts.
In addition, as the Crude Oil Futures curve has moved out of backwardation into contango over the past 5-6 years, arbitrage makes it profitable to build inventories. So yes there has been some inventory building over the course of the bull market. But not all inventories are actually available. Some are being held to fullfill future delivery. Again, this is axiomatic in a contango-d market, which is telling participants to prepare (build inventories) for future tightness in supply.
Finally, I would just like to take a look at the use of the word "shortages." There are not shortages nor have there been shortages of oil in this oil bull market. Bull markets in commodities are not built on "shortages." This is a common misunderstanding. Bull markets are built on supply and demand coming into tight relationship, and often with Future Curves going into contango, thus stripping out the Roll Yield associated with Backwardation. Actual shortages usually cause crack ups. (crack-up booms, for example). Actual shortages often result in price collapses, after the spikes. We saw a mild example of this after the Hurricanes of 2005.
(I nitpick a little over this word "shortages" because it's the word folks on TV like to use, to assert there was never any reason for the price of oil to rise. It's really a false dillemma kind of argument.)
Peak Oil or Oil Depletion is now without question in the Crude Oil Futures curve out to 2012. The CFTC in fact has just done a study basically affirming that price discovery and market participation in the Out Years (2010 and beyond) has undergone an historic change. The implications are manyfold, but let me just give one: the price for oil for longer-term future delivery is now much more "true" or reliable than ever before.
Bottom line: expect alot more inventory building in the years ahead, and, expect alot more volatility in Front Month and Near Month contracts--from which it is unwise to derive too much information.
Gregor
In case you missed it, Stuart's was his current conclusion, based on actual production (or at least best estimates, from multiple agencies). The implication of the adjective "total", in "total guess", is that Stuart has just tossed a coin.
Stuart has offered a bet - $1000 that SA will never consistently produce at the current stated capacity of 10.7 mbpd. If you're confident of your "total guesses", why not take him up, serengetiplains?
Sofi, I don't mean to imply that Stuart hasn't done his homework and hasn't properly tabulated his information sources. I do mean to imply that there may exist (probably exists, knowing Saudi's secretiveness) facts of which Stuart has no knowledge that could render his conclusion not just a little but entirely wrong. We have at least some basis for thinking Saudi could increase its production to 12mbpd. In light of this latter, and assuming Saudi hasn't told us everything, a reasonable assumption, we can place a good bet that what they haven't told us is not immaterial.
My point is that Stuart could be not just a bit wrong, but way off due to what we don't know. A guess that could be way off deserves an adjective like total.
Fair enough but you seem to be saying that because of ways that SA could manipulate the figures, Stuart's analysis may be flawed. That is, because of things we cannot know anything about, using the actual production figures is pointless. Well, in that case, any analysis would be useless and we might as well continue assuming that the market will provide, whatever the demand, and only start to worry if the production figures continue declining for a time much longer than the figures appear to suggest here.
Stuart's guess doesn't deserve the adjective "total" because it's based on an analysis of the data. Maybe the data is a "total guess", but Stuart's analysis most certainly is not.
To me, the alternative to Stuart's analysis seems much more of a coin toss. Surely, we can only go on the data. If you're as confident as you seem to be, there should be no problem taking Stuart up on his bet.
Sofi, using actual production figures *is* pointless if we do not know (and it is a fact that we do not know) the overall context for those figures. If we had even but proper reserves numbers, we could make a reasonable guess. We don't even have that.
Sofi, there's a reason Simmons says we'll only know peak by seeing it in the rear view mirror. We just don't have the data we need to predict its arrival. Stuart's is a total guess. Sorry, it happens to be true. Stuart implied as much by saying he's out on a limb with his "conclusion" (guess).
Serengetiplains,
Bullcrap (I can say that, right?)
But why would you want to?
Wouldn't you rather say something, oh, I don't know, useful? Rebut his argument, perhaps? Provide some counter-evidence?
You know, something of value?
Not risking much here... they claim to be going up to 12.5 by 09... a braver bet would be higher than they are now... how about getting back to, say, 9.5, where they were for a long time, say for a period of at least six months? Well, if you don't like this number, how about 9Mb/d avg for a year? How about any twelve month period, no later than year end 09?
"Not risking much." Are you saying Saudi's not in decline like Stuart says they are?
I'll bet Saudi increases their production above 9mbpd before 09.
The road to Olduvai Gorge travels through the serengeti plains, no?
Believing in what sa says, rather than what they do, is, indeed, an act of faith.
Fine, Dave, YOU make the "effort."
I prefer preparation over disputation. How many g-damn arguments does one need to hash through before one realizes one is on one's own?
My thoughts exactly. I like TOD and these guys are great, but, the "debate" is over in my mind. I'm looking to research what I need to do now. The next sharp increase in oil prices will make TOD mainstream and then the shortages will appear as others rush to prepare.
Best of luck to all readers, ugliness is coming.
D
Dave, You assume " love that word" that people do not see what they want to see. Of the 250 people ( almost all experts in the natural gas business) who attended the EIA clusterf--k in 1999 only two would not sign off that supplies would rise mercifully to wonderful levels by 2015, Simmons and Riva. They were right and the 248 were wrong. They all had the same data. Concerning peak oil, and I have been studying this for ten years, people believe what they want to believe, in both cases.
Dave their is no real conspiracy here.
http://en.wikipedia.org/wiki/Hydrogen_economy
http://www.americanenergyindependence.com/
Thats enough links find more.
You have a neo-con begging America to kick the oil habit.
The only problem is he won't home out as say KSA is toast and we have no more oil.
Thats it.
If GW pushing the hydrogen economy ethanol and America cutting its oil use by 20% does not scare you that's your problem. He has told us as much as his handlers allow.
You know? I think they might not believe it themselves. I suspect many of Aramco's head officials have had a western neo-classical economical education and they may just believe that this is simply a matter of investment. Look at the way large businesses such as Enron crahsed. Way passed the point of no return the higher management actually still believed there was a way out.
deleted: double post
The only indication ew have that it might not be business as usal in KSA is the increase in drilling rigs. The increase/decrease in supply is nothing unsual. Maybe they're voluntarily decreasing production to get a higher price.
Let me ask you this:
Do you rather sell 12 million barrels @ $60 or 8 million @ $90? In either case you make the same amount of $$, but in the latter you go easy on your resources. In term of competition they don't have much to fear unless we go full tilt nuclear which takes 10+ years to implement.
I think it is too early to tell one way or another. The increase in drilling rigs might simply because they realize the implications PO has and want to be ready when the day comes. Energy = Power...in more than one way. Putin was the first one too understand this concept; KSA might have just come to the same realization.
Anyway, unless we get our act together in a hurry we'll be dependent on such friendly folks as KSA, Putin & Chavez.
Oil has been increasing in price for some time now say 2004 on. They could have adopted this strategy at any point instead they pumped all out the whole time and did not increase even when prices hit a high of almost 80.
So the simplest explanation is they have continued to pump all out and are now in terminal geologic decline.
1.) The decline in KSA production is steady and does not correspond with any statements they have made except the one about a 8% decline rate.
2.) Prices have been high for some time and KSA has responded by pumping as much as possible and not it increased production in response to price changes.
3.) Everyone else is pumping flat out from the data OPEC non OPEC everyone.
4.) A fairly impressive amount of analysis has been done that points to a high probability that Ghawar has peaked about now.
5.) If you assume that peak oil is now and look at the actions and statements of the President of the United States
it looks like someone believes in imminent peak oil but does not seem to consider informing the democracy of the situation.
6.) KSA's statement are bombastic and inconsistent and therefore unbelievable. I'm not saying that facts don't slip out in their statements but the facts must be correlated with other evidence the 8% decline rate is correlated here.
Unless you find correlation for the belief they have adopted a strategy of reduced production recently you cannot take it as a fact. If they chose they could provide supporting evidence that they have indeed cut back production voluntarily. I mentioned earlier in the thread that I suspect they are capable of doing a small surge from tank storage obviously they had to fill these tanks so I think their is some truth in their statements but I think they are simply diverting some production to fill tanks. But its probably 500k bpd or less to prepare for a sham summer surge.
In fact, what I sometimes think is possible is that KSA is withholding their oil from the market and letting everybody else sell theirs as fast as they can, which would put them in a rather neat position down the road, don't you think?
But, my view on this changes minute-to-minute, as it would in the absence of any good information. Black Box = let your imagination run wild.
Dave, I'm with you on this. I surely don't know what KSA is doing, but being intelligent and therefore forward-looking they could very well be letting other producers exhaust themselves at these lower prices. The rig count increase could be part of the strategy - lock them up so others can't use them. They don't care about the cost, they'll get it back when the price of oil increases.
My own pet wild theory is that they now consider themselves to be in a war with the axis of evil [Washington, London, Tel Aviv] and their first attack is the oil supply. They have seen how well the Iraqi Sunnis have put a large wrench in the machinery, and have realized that they too can fight successfully so they are preemptively making the first move.
They must surely be aware of Zbigniew Kazimierz Brzezinski's plan deveoped under Carter for taking over the Saudi oil fields, and the neo-cons map of the revised ME, either of which would scare the hell out of me given Bush/Cheney and the neo-cons.
Hi Im,
re: "...they are preemptively making the first move."
It seems this strategy might carry some significant financial risk, would it not? If there is a way to analyze this risk, it might be easier to guess about the strategy.
I think Saudi-Arabia is far more worried about the shi'ites. Their Axis of evil might consist of Tehran, hezbollah and Iraq.
But in the end I think that SA has western educated managers who actually believe that everything is solved by proper investment and businessplans. Mind you, George Bush studied businessschool too. It seems to me that modernday economics, junkscience as it is, makes people into pathological optimists.
It was quite interesting to read what several newspapers, especially The scotsman, wrote during the beginning of the decline of teh North Sea. They kept publishing that it was a mere blib, nothing to worry about, because investments were being made. (Sorry, no link, it's behind a pay wall)
I agree Dave, oil in the ground is like money in the bank. In fact its better, don't produce today and the price goes up so that what you do produce is worth more AND you get to still produce that oil later. Its the business model for a postpeak world.
The interest to me however is what it says about 2007. In all likelihood there will be some event that raises prices and calls on great production from the existing producers. If SA cannot produce, and indeed if their production continues to decline at the same rate, uncertainty is over, everyone knows the truth. If SA can produce then the shape of that production spike says a lot about their capability into the future. It shouldn't be forgotten that they are supposed to be able to go from 9.5 to 12 by 2011 - 8 to 12 would be an even bigger (and more unbelievable) 50% jump. 2007 cannot see a continuation of 2006's path and not signal peak.
All-in-all 2007 should provide some answers.
At the same time, there is a question that is as important and needs an answer. 2006 has seen static production levels - yet the world economy hasn't obviously suffered. How and where is the shortfall in expected production growth been taken out of the market, and how able is this mechanism to take more? Peak oil in itself means nothing, its the reaction it can create in the world markets/society that governs its effect.
I've done a little modelling myself and it suggests that for quite a while the world can adjust by making the have-nots have less. That time provides scope for efficiency savings in the first world to stave off structural problems even longer. However, that's a rational world. Add in some irrationality and it can rapidly go to hell with some very unpleasant potential 'solution' options open to countries to grab bigger slices of the pie.
Yes, the world economy has done very well these two years (average growth is around 4.5 % per annum). In fact it appears that $60 Oil is sufficent to kill further increases in demand which was growing at 1.8% per annum at prices below $40 per barrel.
If the price goes up to $90 per barrel will there be a continous drop off in demand? ie Demand will decreae at 1.8% per annum?
If so, post peak won't be so bad and we'll be a good position to tackle Global Warming, since Oil contributes about 40% to CO2 emmissions.
In all I've been really impressed at how Economics has handled two years of flat production AND yeilded 4.5% world growth both years.
I'm not sure if you read Stuart's piece but it appears that the decline is not being deliberately manipulated.
Just a reminder regarding the Saudi stock market, which started crashing in early 2006. Note that the Venezuelan stock market boomed over the same time frame (at least until Hugo started nationalizing companies).
Stuart, I guess we all agree! Nobody's taken you up on your bet yet. John Tierney probably will though. Want to make some money?
I contacted him at the time but he never got back to me (overwhelmed, I guess).
I wonder why Dave Cohen hasn't taken you up on this. I'm sure the "other interests" have plenty of money to cover it.
You see, Cid, where it says "Senior Contributor" on the right-hand side of the page? Look at the names.
I forgot more about peak oil in the last 1/2 hour than you will ever know about the subject.
And with that, I think this will be my last comment on The Oil Drum, ever. I will post one more story, and it will be my last. One reason (there are others) is that I don't want to put up with people like you, Cid.
Goodnight, and God Bless.
Stuart's post stimulated me to look at some of the source data on the graph which is the Baker Hughes rig count, which I have always been too lazy to go look at. As I guess with many others I have been prepared to think that 'the Saudi's are drilling like frenzy' and pulling oil rigs in from all around the world.
If you look at the graph and the data the Saudi oil rig count has gone from 19 back in Dec 03, to 21 a year later, to 32 in Dec 05 to 49 in Dec 06.
Its a decent increase, up 2.5 times or so.
But I didnt know that there are in fact 700 plus rigs classified in the Baker Hughes international section (ie non north American). It looks to me that the total world rig count is 3043. So although the Saudis have substantially increased their rig count they are still using a small percentage of rigs in world terms (about 1.5%)
Particularly when you consider for example that India increased its rig count from 34 back in Dec 03 to 68 in 12/06 (ie a doubling), and that for example Argentina still has more rigs working (67 in 12/06) than SA.
I guess all I am drawing attention to is that SA has hardly cornered the market in rigs based on the above. Others have more rigs, even small producers, and have increased them (for reasons I know not).
I guess all I am asking is should we be getting as excited as we are by that rig count element? I am quite prepared to be told by Stuart and Westexas etc that we should! (but I am truly amazed how many rigs are actually out in the world, particularly NA.
Yes, with 2 1/2 times the number of rigs they had in 2003 they are producing less oil. That is the point.
As I wrote higher up:
This is more like it - query the data! Turn the scrrew on Stu! Find holes in his analysis!
Come on you well-paid nay-sayers - is any of you worth your money? Andy isn't one of you - must your adversaries do your dirty work for you? Earn your keep!
Hello Ian Down Under,
You make a good point--we should be trying to find any weakness in SS's keypost--but IMO, it is darn hard to do [although Dave Cohen's theory of KSA cutting production, then just biding their time is an interesting theory]. Hopefully Dave can find some stats to write a keypost on this.
I also think it will be interesting when R-squared & his family finally get resettled in Scotland, then Robert Rapier will have more time to play the devil's scientific advocate. I thought the past RR vs WT debates were excellent-- I think an RR vs SS debate would be an outstanding barnburner too.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Well folks, I was going to play devil's advocate this weekend, but after briefly having Internet service yesterday, it was turned off. (Turns out they turned it on too early, and informed me it would be turned on for good on the 7th). Right now I am leeching off my neighbor, and the connection is so poor that I dare not start a debate.
My primary thoughts on Saudi are the same. If they have peaked, they did so at a very convenient time - just when demand was going down. I look at the moves they have made, which started well before the announced OPEC cuts, and I don't see a single move that isn't consistent with what the market would have dictated. They never cut production when demand was clearly rising. When they cut production the first time, inventories were very high (and rising). A short time later, oil prices started falling. And, looking at oil inventories (and prices), the market is clearly adequately supplied. So, if Saudi had not cut production, the market would be substantially oversupplied.
Robert this started happening before demand started dropping. Wasn't demand still rising after Hurricane Katrina, and yet SA production began to decline after that event occured.
Secondly what is the explanation for all those additional rigs?
No idea if I will be able to post this, but I will try. I have been disconnected ever since I made that last post. That’s what I mean about not getting into a long debate.
I detailed the timeline in the debate response to Jeffrey. When they cut production, crude inventories were very high and rising. That indicates that demand was down. You can look up the inventory numbers to confirm, or look at my post to Jeffrey.
As for increasing rig counts, my take on that is that they went on an exploration binge. If they really do intend to increase production, they are probably going to do some exploring.
That’s all from me. I may revisit this in the not too distant future.
To the extent that demand was down, it was the result of high oil prices--and high prices were a result of lower crude oil production.
Regarding prices, the inflection point was 5/05, which was also, so far, the all time record high C+C production rate. The cumulative shortfall between what we would have produced at the 5/05 rate, and what we actually produced is about 366 million barrels, through 12/06 (EIA, C+C).
The shortfall of about one-third of a billion barrels of crude oil corresponded to about a two-thirds increase in the average monthly Brent spot price, 20 months after 5/05 ($62) compared to the 20 months prior to 5/05 ($38).
It's interesting to go back to previous OPEC/Saudi Arabia statements:
src: EIA
$40 a barrel was too high in 2004 and now $50 is too low, it's quite a dramatic change!
$40 a barrel was too high in 2004 and now $50 is too low, it's quite a dramatic change!
It's the same for anything. As I have said before, if your house was worth $100,000 3 years ago, but appraises for $200,000 today, will you sell it for $100,000? Why not, when that would have been enough in 2004?
Rather than revisit points we've debated extensively in the past, I would like to hear your explanation for the new evidence: the exactly 300kbpd bump that punctuates the decline in Saudi production last year.
I just e-mailed you before I saw this. My Internet connection sucks, and I am constantly disconnected. So, I can't guarantee continued responses. But here is what I e-mailed you:
That (Haradh III) probably is what it was. They probably brought that production on line. But, you want to prove your production rate before you take other production offline. You don't take the other production offline as you are bringing the new production on, because you don't know for sure if things are going to work out like you think they will.
You can see this same pattern on their prior production declines. There will be a decline, and then a little step up, and then more declines.
Just noticed something interesting.
Stuart is of course correct that the month to month Saudi decline is about 8%, but the annual decline from 2005 to 2006 was 4.2% (EIA, C+C), which is quite close to the long term Texas decline of about 4% per year.
So, for Texas in 1973 and Saudi Arabia in 2006:
*Same Stage of Depletion, based on HL
*Increasing Oil Prices
*Increased Drilling
*Declining Production
*Initial Saudi Decline Rate Matches Long Term Texas Decline Rate
Yes this is the problem is it not. Why the bump ?
Also it would be nice to graph how production decreased in the past when we know for a fact KSA was cutting production.
The signature of a cut to manage output might be very different from what we are seeing now.
My guess is it is a step function.
Here is what I just e-mailed Stuart, and this will be my last entry tonight:
I can't keep this up. I will compose a response, and then I will try to send it 20 times before it goes. This is why I didn't want to get into a debate right now – I am only connected about 5% of the time.
What I can tell you, based on experience, is that when you are commissioning a new unit you bring it up to rate and prove it first. Things don't always work like you think, even if you have loads of experience. Things get missed. Assumptions turn out to be wrong. So, you prove your unit, and if you don't need the production at the time the unit is actually commissioned, then you either shut that unit down, knowing you can bring it back online and knowing the production you can achieve or (preferably) you back down the production of some of your other wells.
If you look at the inventories - and I think that is a very big piece of the puzzle that many people are overlooking - you will see that crude inventories have been in very good shape the entire time they have been cutting production, and prices are well off their highs as they have made cuts. That says that the market is being adequately supplied. As I said, it definitely was a convenient time for them to peak if that's what's going on. I think they are simply trying to avoid an oversupply situation and keep prices high.
Wouldn't you expect the price to go sky-high if they were cutting production when the world needed it?
But didn't Stuart's analysis show that there are two decline lines, one 300 kbpd above the other. Are you saying that they're still producing above the level they want and will deliberately revert to the lower decline line, eventually? What Stuart's analysis seems to show is that the extra 300 kbpd merely shifted an unenforced decline. Is there anything to support your suggestion of how that 300 kbpd fitted into the production numbers?
It seems as though a few people are guessing about what the declines mean, whilst Stuart's conclusions appear to be supported by actual data.
OK, this really is the last entry for tonight (here's hoping it doesn't take 20 tries to post it).
If you look at the graph that Chris Vernon posted, you will see EXACTLY the same behavior in 2001-2002. You had a fairly steep decline rate, a bump up at the beginning of summer (same time frame as in Stuart's graph) and then a continued decline along the same slope. So this is not without precedent. If we were discussing this situation in 2002, you could have made exactly the same argument that Stuart is making now.
As far as data, I am supporting my speculation with data. The price and inventory pictures, which do not support an involuntary decline, are data. And I presented that data in my essay response to Jeffrey.
My prediction is that you will see the decline halt by summer. If crude inventories get pulled down, I predict that you will see production pick back up.
Hi Robert,
Thanks for providing well-reasoned alternatives to Stuart's work.
Considering your thesis:
Plenty of spare Saudi capacity,
Prices being artificially elevated by reducing pumping,
New units being commissioned,
High or adequate inventories,
I think they are simply trying to avoid an oversupply situation and keep prices high.
Would you be claiming that KSA, Simmons, Pikkins and others are colluding to create fear of shortage (or PO) to raise prices, then short the oil market, and dump excess capacity thereby reaping vast profits?
No - I think your comments are appropriate context. I think these projects are enormous infrastructure projects though - it's worth having a surf around Aramco's website. I don't get the feeling that the rig count is the bottleneck - it's getting all the infrastructure in place to handle such enormous flows of oil (in different places than the enormous flows of oil that are no longer coming) - oh and water and gas too. They don't need as many rigs as another country to produce a given amount of oil, since the wells are still much more productive than other places (due to the nature of the reservoir rock there), but of course they need similar amounts of injection, GOSP, etc infrastructure to handle a barrel of oil.
Thank you for the reply Stuart. I know westexas has posted on a number of occasions how when the US went over the peak the number of rigs used was increased greatly (all to no avail). Do you (or westexas) happen to know how much drilling was increased by? I am still somewhat staggered by how many rigs there are active in the US now, in relation to the rest of the world. I do take your point that in principle the Saudis can get more bangs for their buck with any individual rig - but personally having looked at how many rigs there are in circulation, and having realised that all the Saudi number has increased by 2.5 times in 4 years (yet they still have a mere 1.5% of the world's rigs, or less than India), I will be a little more circumspect in telling people that the Saudi's are engaged in a drilling frenzy. If we are realistic they aren't really are they? (to be fair I dont think you have ever used those terms).Or at least not to the level that they could be - as you say rigcount is probably not the bottleneck, and we possibly should not place as much store by it as we might.
For the record I am 60% convinced the Saudis have a problem. And boy if that 60% is correct boy do we have a problem.
This article could become an historical one.
Anyway it is a great one!!
I posted something about Opec poorly believable statements in December 2006 ( it was also "passed" by national newspapers)
http://petrolio.blogosfere.it/2006/12/la-lavandaia-fa-i-conti-allopec.html
http://newscontrol.repubblica.it/item/262677/la-lavandaia-fa-i-conti-all...
( sorry for the italian, try and use google for translation)
Shortly, i said that the saudi production decline was much more compatible and consistent with a post peak and there were clear inconsistencies into the opec statements that proved this was probably right.
and now Y showed that those statements were, with very good chances, real lies.
Thanks again to TOD for the amazing work you all do for us
"peakoilers"
Pietro Cambi
Stuart, this article you've written is incredible, an eye opener, downright scary. (we all knew it would eventually happen) Thank you so much!
However I am in the belief that KSA wants everyone to believe that KSA has an unlimited supply of oil, (thereby they can continue to hold the ace card, if you will) and will sell the last drop, (yet remind us perhaps with Baghdad Bob), they have more in unproven reserves and likely decieve us with actual holdings.
Many doomers here are not exactly wishing doom, in so much as they are feeling vindicated in their belief this was gonna happen. and they are seeing it slowing unravel.
Like i have said before:
like a train at full speed, we are headed straight for a brick wall!
it's gonna get ugly!
IF this is the new trend for SA, we would see the SPR being added to in additional capacity and topping up, just like people hoard gasoline when there is a shortage. If they want capacity through negotiating, we should see a ramp up in construction projects for the region in larger pipes.
If Ghawar is in decline as JH says, then I would be looking for drilling activity, larger pipes and more O/S equipment purchases as the water cut will be higher monthly now.
Oilcanboyd
Thanks Stuart very important post
Hi Oilcan,
re: "...we should see...
Could you speak to any of the criteria you lay out here?
1) SPR - up?
2) construction projects in larger pipes - up?
3) drilling activity - up?
4) larger pipes - and more equipment purchases? - Any way to track this down?
Well, I have to say that your analysis increases my opinion of peak right now from 40/60 to 60/40. There's still a lot of uncertainty, though, and we may get suprised again. As RR has pointed out, there are other possible explanations for the KSA production falloff.
Ultimately, the only way we are going to know for sure is after the fact, the "Rear View Mirror" test.
Stuart, thanks for this post!
A side question: When you say:
"I'll bet $1000 with the first person who cares to take me up on it that the international oil agencies will never report sustained Saudi production of crude+condensate of 10.7 million barrels or more."
If someone were to take you up on it when would the issue be decided? "Never" is a very long time in the future... (Not me by the way I am in no position to doubt the state of SA production capacity)
That being said if I were in a position to make such a bet I think I would have offered stakes of 2 1/2 oz. of Gold, or perhaps 400 gal. gasoline rather than $1000 US. If things evolve as it seems they might be more useful. :)
groomed for this
great link with references
http://socrates.berkeley.edu/~pdscott/AAAChap8REVAlQaedaEstablishmentOct...
Press Box
Northern Iraq
The Taq Taq License Area in the Northern (Kurdish) part of Iraq is the first asset presently held by Genel Enerji under a Production Sharing Agreement (PSA). Over the past years, this asset has been instrumental for Genel Enerji in the development and growth of its petroleum exploration and development business. As of today, Genel Enerji holds a 55% participating interest under the PSA, while its partner Addax Petroleum International holds the remaining 45% participating interest. The Taq Taq Agreement Area #39; is located in the Kurdistan Region of Iraq some 60 km northeast of Kirkuk, 85 km southeast of Erbil, and 120 km northwest of Sulaimaniyah covering an area of 951.3 km 2> (235,079 Acres). The agreement area consists of two different blocks, namely the Taq Taq Development Block and the Taq Taq Exploration block.
Taq Taq Development Project
The Taq Taq development block extends over the entire Taq Taq structure and encloses an area of 639.7 km2 (158,078 acres) including surrounding acreage. The Taq Taq Structure is a NW-SE trending double plunging surface anticline measuring 27 by 11 km with an aerial closure of some 300 km2.
The exploration activities on the Taq Taq structure commenced during the early 60's by drilling of the TT-01 well, resulting in an oil discovery in 1978 with four (4) producible horizons in the Eocene and Cretaceous formations. Two further wells, TT-02 (a shallow well drilled into and producing from the Pilaspi formation only) and TT-03 (plugged and suspended), were drilled into the Taq Taq structure prior to Genel Enerji entering into the PSA.
A detailed data acquisition program was executed after Genel Enerji assumed operations in the Taq Taq license area. The 2-D Seismic Data Acquisition Campaign, ‘11 lines with a total of 170 km' commenced on 1st December 2005 and was successfully completed on 1st March 2006 by the seismic contractor TerraSeis Canadian Seismic Acquisition Company.
Subsequently, an initial appraisal program was implemented by drilling two wells (TT-04 and TT-05) during 2006, which was later extended to 2007 by planning to drill the wells TT-06, TT-07 and TT-08. The scope of work focuses on the delineation and appraisal of the Taq Taq structure by data acquisition, collection and assesment to reduce technical uncertainties. In addition, the wells' production capacity is envisaged to meet the local energy requirements and to finally prepare a detailed full field development plan.
The technical evaluation of the currently available data of the three productive horizons of Cretaceous (from 1,617 m to 2,043 m) resulted in calculated oil in place in the Taq Taq structure to be around 2 billion barrels. The predicted amount of recoverable reserve from all productive zones is estimated to be approximately 750 million barrels.
285 km2 3-D Seismic Data Acquisition Campaign over the Taq Taq structure has already been planned in year 2007. The campaign is scheduled to start at the end of May, 2007.
Kewa Chirmila Exploration Project
The Kewa Chirmila exploration block is part of the ‘Taq Taq Agreement Area' and extends towards South along the Taq Taq-Kewa Chirmila trend. The total area covered is 311.6 km2 (77,001 Acres).
There are a series of anticlines and synclines within and around the block in front of the Mountainous zone. Kewa Chirmila, the only defined surface structure within the block, and located 20 km south of Taq Taq anticline, is a NW-SE trending double plunging surface anticline measuring 12 by 4 km with an aerial closure of some 48 km2. The surface expression of the structure forms 300 m positive feature of the topography.
Subsequent to the acquisition of a minimum of 80 km 2-D seismic in 2007, an exploration well is planned to be drilled either at the end of 2007 or in early 2008.
I see little worth responding to, where people disagreed with me, except where Stuart told me that I should make the effort that I recommended.
I decline. I can not fathom what KSA does at all. Since I don't have any real data in front of me, I'll pass on this challenge, and not speculate about what is going on.
None of this KSA crap changes the fundamentals of the peak oil problem one iota.
-- Dave
*Dave takes his ball and goes home.*
Here in Australia, when you don't get your own way, and you feel like no-one loves, and you storm out of the room we say:
He's spat the dummy (pacifier for USians).
This could mean that Saudi Arabia has been living up to its OPEC commitments, it could also mean that cheap production is dropping off. A fact that lends some support to the latter possibility, Saudi Arabia is investing some $70 billion over the next five years to boost production capacity. Given the lag effect of upstream investment on production capacity, we should expect that Saudi production capacity (actual + reserve capacity) will increase in this five year period. If it doesn't, then it looks like cheap Saudi production will be fading and that Saudi production may be peaking. See http://banaei.typepad.com/energyblog/2007/03/t_boone_pickens.html
I'm having trouble understanding the rig chart. It has only a legend which reads "oil rigs in country" yet the value goes up and down. Do they break or dispose of rigs over time? Also the number went from below 20 to about 55. Is that really the total rig count in Saudi Arabia, just 20 to 55?
I'm *very* curious as to why Haradh is being run at full capacity of 300 kbpd. In my personal experience, running a stationary engine at full speed is only done when necessary, as it always shortens the life of the equipment.
So, is it being done because the accountants have determined that this is the most profitable way to do it, or because it is alleviating a problem elsewhere? If the former, we'll see it drop off line for major maintenance regularly; if the latter, Stuart gets to keep his one grand.
The other thing I see on the threads of this post is that somehow the oil supply peaking means the end of the Western way of life. It will mean more expensive petroleum based products, and thus everything else in the supply chain. So, V8 Range-Rovers, BMW's and SUV's will be hard to sell. Cars that are more fuel-effecient will gain market share. Holidays will mean getting away to whatever local beach/park/mountain range, not Europe, the Carribean or Bali, as air travel becomes more of a luxury (as it was in the 20's). Councils (Cities) will be very unlikely to charge excessive local taxes to keep roads 'perfect'....we will adjust to a lower quality road, with a hole or two in it. Besides, the lighter, more-fuel effecient cars will wear the roads out more slowly.
I agree with the proposal that stagflation is a likely model. You won't be buying a second large LCD TV, the money will have gone on increased electricity, grocery and water bills. Carbon taxes may also take up disposable cash (assuming the central government is smart enough to legislate them), unless you own a farm with a whole lot of trees on it, in which case you can look forward to carbon credits.
Bill G. will turn out to be wrong, the world won't be getting faster each year after all....how could it when the V8 Range Rover salesman now gets to his [new] job on a moped? Jim Kunstler will turn out to be somewhat right in that some types of suburbia won't make it, especially in the extremes of heat or cold where energy costs will be prohibitive to air-con or centrally heat a house for months of the year.
I'm sure that Peak Oil will arrive 'soon'....the French think within 6 years, and IMHO they're small enough to know where the crumbs are, yet smart enough to work out how serious a finite supply of oil is. They're the only country I'm aware of where the Nuclear industry supplies the bulk of electricity (75%, I believe). The downwards slope post-peak won't move most of the world to anarchy, it will cause some real pain, and my guess is that the more oil-dependant a life-style you have today, the more pain you could have post-peak.
Ross.
This whole thread - Stuart's original post and the many comments that follow - is an amazing chunk of information. The big question is: how solid is the conclusion, widely held here, that the Saudis are in peak or post-peak oil?
As a newcomer to all of this, I find it hard to come up with a clear answer based on the evidence at this site and elsewhere. There just seem to be so many bits of contradictory information.
One key point against this being a peak in Saudi production was the comment by Capt. America that the Saudis have ordered two more vlccs. As CA noted, why would they do this if they knew oil production is on the decline? Are they deluding themselves about how much oil is really present, or is it a more mundane explanation? (eg, the vlccs are just replacements for an aging fleet)
The weird thing is that I cannot find this comment on this page anymore. Where did this comment go? Was the comment withdrawn? Is it hidden somewhere that makes it hard to find in all these threads and subthreads? Have there been more additions to it? I have a pdf screenshot of this site that clearly shows the comment a few days ago, so it was indeed posted here.
More importantly, is there other evidence that shows the Saudis are indeed gearing up for increased production?