Saudi Arabia's Reserve "Depletion Rates" provide Strong Evidence to Support Total Reserves of 175 Gb with only 65 Gb Remaining
Posted by Sam Foucher on April 20, 2007 - 11:05am
This a guest post by ace.
Summary
In Dr. Saleri’s Saudi Aramco presentation on Feb 24, 2004 to the CSIS in Washington, D.C., he stated that Our typical depletion rate is about two percent. However, Aramco’s definition of annual depletion rate is consistently calculated as annual production as a percentage of total reserves. Aramco’s calculation method will be confirmed by the examples below.
Data from the presentation is used to convert Aramco's depletion rates into conventional depletion rates which show that conventional maximum depletion rates forAin Dar/Shedgum, Abaiq and Berri are well above 5%/yr. In addition, Aramco's stated depletion rate for Shaybah shows that Aramco believes that Shaybah has up to 20 Gb total reserves.
In 2003, assume that Aramco could have produced at an average capacity of 9.5 Mb/day for the entire year. Production reached this level during the Iraq invasion in March 2003. The annual production is 3.5Gb (9.5Mb/d*365d*(1Gb/1000Mb)).
Aramco’s proved reserves are equal to the annual production divided by Aramco’s definition of annual depletion rate. Thus, total reserves are equal to 175Gb (3.5 Gb/2%), which is about half of their stated number of an extremely optimistic 359 Gb.
Finally, assuming that total reserves are 175 Gb and that these reserves are produced at a conventional depletion rate of below 5.5%/year, the oil production rate of Saudi Arabia is forecast to Dec 2020. This forecast shows that production follows an exponential decline curve down to 4.5 million barrels/day in Dec 2020 and that it is highly likely that the world's crude oil and lease condensate production has passed a peak of 74.2 million barrels/day on May 2005.
Definitions
Depletion rate (rem) = Common or conventional definition of depletion rate which is annual production as a percentage of remaining reserves (assumed to be the same as total reserves less cumulative oil reserves produced)
Depletion rate (tot) = Aramco’s definition of depletion rate which is annual production as a percentage of total reserves (assumed to be the same as initial proved reserves)
Reserves depletion = Cumulative reserves produced as a percentage of total reserves
URR
= Ultimate Recoverable Reserves or total reserves
Gb
= billion barrels
Mb
= million barrels
Saudi Aramco’s Depletion Rate Calculation Method
Dr. Saleri’s presentation shows Aramco’s calculation method for depletion rates. Figs 1, 3, 5 and 6 are sourced from this presentation.
Fig 1 below states in the title that depletion rates are a “% of Initial Proved Reserves” which are the same as depletion rates (tot).
Fig 1 – Maximum Annual Depletion Rates (tot) – click to enlarge
To check this calculation, Prudhoe Bay’s maximum depletion rate (tot) of 4.2%/yr is verified. Here is a chart of Prudhoe Bay’s production profile. A total reserves (or Aramco’s term of initial reserves) figure of 13 Gb is used from this source as it is dated 2002 rather than the chart’s estimated reserves from 2001.
The maximum depletion rate (tot) is equal to the maximum annual production as a percentage of total reserves. Depletion rate (tot) = 0.55Gb(years 1980-87)/13 Gb = 4.2% which agrees with the depletion rate (tot) of 4.2% shown in Fig 1.
For comparison, in 1993, the depletion rate (rem) was much higher indicating that the Prudhoe Bay field was being produced aggressively. Annual production was less at 0.4 Gb and cumulative production was 8 Gb. Remaining reserves is total reserves of 13 Gb less cumulative of 8 Gb to give 5 Gb. Depletion rate (rem) = 0.4 Gb/5Gb = 8%/yr.
Fig 2 – Prudhoe Bay
Saudi Aramco’s Depletion Rates (rem) for Selected Fields
Fig 3 shows the reserves depletion of selected fields.
Abu Sa’fah has a reserves depletion of 21%. Fig 1 shows Abu Sa’fah (assumed to be ABSF) to have a maximum annual depletion rate (tot) of 1%. From the definitions above, reserves depletion is cumulative reserves produced as a percentage of total reserves. Depletion rate (tot) is annual production as a percentage of total reserves.
Depletion rate (rem)=annual production/(total reserves – cumulative reserves produced)=1%(total reserves)/(total reserves – 21%(total reserves)).
Abu Sa’fah maximum depletion rate (rem)
The total reserves variable cancels in the above equation resulting in the depletion rate (rem) = 1%/(100%-21%)=1.3%/yr for Abu Sa’fah, which is a low depletion rate (rem).
Applying the same formula to the other fields:
Safaniya maximum depletion rate (rem)
Depletion rate (rem) = 1.5%/(100%-26%)= 2.0%, still low.
Zuluf maximum depletion rate (rem)
Depletion rate (rem) = 1.8%/(100%-16%)= 2.1%.
Ain Dar/Shedgum maximum depletion rate (rem)
Depletion rate (rem) = 2.2%/(100%-60%)= 5.5%, this field is being pushed hard.
Abqaiq maximum depletion rate (rem)
Depletion rate (rem) = 2.8%/(100%-73%)= 10.4%, this is very high but this field has been producing since 1946.
Berri maximum depletion rate (rem)
Depletion rate (rem) = 4.1%/(100%-28%)= 5.7%, this field is being pushed hard.
As shown above, the maximum depletion rates (rem) range from 1.3% to 10.4% which is more realistic as supported by this statement for Middle East fields from this source . “Adopting a depletion rate for Iraq of 4-5%, which is well within good management practice for large fields”.
Fig 3 – Reserves Depletion – click to enlarge
Fig 4 below shows the actual depletion rate (rem) for Aramco, assuming total reserves of 175 Gb. The actual depletion rate (rem) is now between 4-5%. If the depletion rate (rem) is kept below a maximum of 5.5%, reflective of good reservoir management, then Aramco’s production will stay below 9 Mb/d and will continue to decline in order to keep the depletion rate (rem) below 5.5%, shown in Fig 7.
Fig
4 – Actual Depletion Rate (rem)
– click to enlarge.
Shaybah Field Total Reserves
The figure below is also from Dr Saleri’s presentation. The depletion rate (tot) is given as 1%/yr with an optimistic production plateau of more than 50 years.
Fig 5
– Shaybah – click to
enlarge
The annual production is 0.5 Mb/d*365d=182.5Mb/yr or about 0.18Gb/yr. Applying Aramco's depletion rate (tot) of 1%/yr gives total reserves=0.18Gb/1%=18Gb for Shaybah. This number appears very optimistic next to Colin Campbell’s figure of 6 Gb reserves for Shaybah, discovered in 1968, from his book “The Golden Century of Oil 1950-2050”.
However, this source agrees that Shaybah might have 18 Gb:
UAE: Saudi Border Oilfield
The UAE and Saudi Arabia are debating the ownership of the border oilfield at Shaybah, which contains nearly 1.5 per cent of the world's total crude resources. Discovered in 1968, the field straddles the UAE-Saudi border and is believed to be one of the world's largest onshore oilfields, with current estimated proven reserves of 15.7 billion barrels. Up until 25 December 2003, the field had yielded one billion barrels, however oil industry sources believe its recoverable oil potential could rise to 18 billion barrels in a few years with the deployment of new technology (such as horizontal drilling).
Fig 3 shows Shaybah’s reserves depletion to be only 5% to 1/1/2004. Given that Shaybah has produced (0.5 Mb/d*365d*5yr plus 0.2 Mb/d*365d, or 985 Mb) about 1 Gb to 1/1/2004, Shaybah’s total reserves using this calculation is the about 1Gb/5% or 20 Gb. At least, Aramco’s data shows consistent optimism within their presentation. I do not share their optimism and believe that Shaybah’s reserves are much lower than 18 Gb.
Saudi Aramco’s Real Reserves
Fig 6 shows a pie chart for Aramco’s resources. Based on this chart, the total reserves are 260Gb+99Gb=359Gb. The reserve depletion is cumulative reserves produced divided by total reserves or 99/359 =28%, which is equal to the reserve depletion number of 28% in Fig 3. This shows that Aramco’s presentation data is consistent.
However, what is not consistent on Fig 3 is showing Ghawar’s depletion at 48% while Total Saudi Aramco is only 28%. Since Ghawar production has been a majority of Aramco’s total production, the depletion for Total Saudi Aramco should be at least 48%. If it is assumed that Aramco’s total reserves are 175Gb then the more realistic figure for reserves depletion for Total Saudi Aramco in Fig 3 should be 99/175=56%.
In 2007, the cumulative amount produced would be 99 Gb plus 11 Gb from Jan 2004 to Feb 2007 to give 110 Gb produced. The current reserves depletion is 110/175=63% which implies that future Aramco field production decline rates will accelerate to ensure that depletion rate (rem) are kept below 5%.
As the 260Gb reserves number is reported in BP’s annual statistics, and the BP reserves number is supposed to be remaining reserves, Aramco had no choice but to exaggerate their reserves upward to an enormous 359Gb! Note that in 1983 when Saudi Arabia nationalised its oil assets, BP stated reserves of 169 Gb for Saudi Arabia. This implies that a total reserves of 175 Gb is consistent with the 169 Gb number as no giant fields have been discovered in Saudi Arabia since Lawnah (only 1.2 Gb) in 1975.
Fig 6
– Saudi Aramco Discovered Oil
Resources – click to enlarge
A comment from Dr Saleri from his accompanying speech to the presentation was Our typical depletion rate is about two percent.
However, to be consistent with the presentation, that means that the Aramco depletion rate (tot) = 2%/yr. Assume that Aramco could have produced a “typical” 9.5 Mb/d in 2003. Fig 4 shows that a production level of 9.5 Mb/d was reached during the March 2003 Iraq invasion.
Annual production for 2003 equals 9.5 Mb/d*365d*(1 Gb/1000 Mb)=3.5Gb. Therefore, using this method, Aramco total reserves equals 3.5Gb/2%=175 Gb, which is about half of their stated number of 359 Gb.
Saudi Arabia Production Forecast
The actual production and depletion rates (rem) are shown in Fig 4 above. Fig 7 shows a forecast of production to Dec 2020. It is assumed that Aramco will continue to practice good reservoir management and consequently the depletion rate (rem) will not exceed 5.5%/year. If the depletion rate (rem) is kept lower than 5.5%, say at 4.5%/yr, then production rates would probably drop below 8 Mb/d in early 2008 and continue to decline.
The forecast shows clearly that Saudi Arabia having its reserves already 63% depleted must increase production decline rates to ensure that reservoirs are not damaged. Themegaprojects shown in the chart are too small to stop the exponential production decline. The reserves of the megaprojects' underlying fields are included in the total reserves of 175 Gb.
Furthermore, if the total reserves of Saudi Arabia are truly 175 Gb and Aramco's production is constrained by keeping the depletion rate (rem) under 5.5%, then the world's crude oil and lease condensate production is highly likely to already have passed a peak of 74.2 million barrels/day on May 2005.
Fig 7
– Saudi Arabia Forecast
Production Rates and Depletion Rates (rem) (EIA
actual lease condensate for Saudi Arabia is zero and forecast
lease
condensate assumed to be zero. Actual and forecast production
is crude
oil only.) – click to enlarge
Saudi Arabia's Reserve "Depletion Rates" provide Strong Evidence to Support Total Reserves of 175 Gb with only 65 Gb Remaining
PDF version
159 comments
Saudi Arabia's Reserve "Depletion Rates" provide Strong Evidence to Support Total Reserves of 175 Gb with only 65 Gb Remaining
PDF version
159 comments
Contact
- Content: editors at theoildrum dot com
- Tech support: support at theoildrum dot com
License
This work is licensed under a Creative Commons Attribution-Share Alike 3.0 United States License.
Thanks Ace, great work.
Man, you just love to scare the hell out of me.
So, by the last graph...we can pretty much expect NET EXPORTS of Zero by 2020 (conservatively).
THAT's 13 years. Eeek! And assuming KSA doesn't decay into ANARCHY and FUNDAMENTALISM way before then.
Must find my happy place, now!
Great post, interesting to come up with a reserve estimate using sa values. GLad to see it got its own thread.
"However, what is not consistent on Fig 3 is showing Ghawar’s depletion at 48% while Total Saudi Aramco is only 28%. Since Ghawar production has been a majority of Aramco’s total production, the depletion for Total Saudi Aramco should be at least 48%."
This statement cannot be right - it implies that if ghawar's depletion was 100% sa would be 100% depleted. SA's 28% would be about right if ghawar contains about half of sa reserves, was produced first, and is about half depleted.
Your right the statement is wrong but your answer is I believe wrong its not that simple since its a weighted average. The correct answer is 56% as presented later. The simple statement although incorrect is "less" wrong than your 28% correction :)
He should say something like with Ghawar representing 50% of reserves and at a 48% depletion its unlikely that a total depletion of 28% is correct.
The real answer of course depends on how the rest of the fields where produced. If nothing but Ghawar was produced you would have a low depletion percentage in the teens.
Agreed. Tired of digging down to the bottom of a Drumbeat to look for Ace's posts. Thanks Khebab.
I don't see how the last graph implies anything of the sort. Even if KSA's production profile follows that graph, there is no way KSA will allow net exports to reach 0 for at least several decades. Domestic consumption will be curtailed well before oil exports dry up.
Other countries highly dependent on oil revenues will follow suit rather than see domestic consumption take up all their oil production. For this reason I think some are too pessimistic when making projections based on the 'export land' model.
I've broken down declining net oil exports in individual countries into Phase One and Phase Two--within the context of an overall decline in world oil exports.
In Phase One, cash flow is increasing, even as exports fall, because oil prices are rising faster than exports are falling.
In Phase Two, cash flow begins to stagnate or decline, because rising oil prices can't offset all of the decline in exports. At this point, I would expect to see some efforts to curtail domestic consumption, but by this time, net exports will have fallen quite a bit anyway.
The phase two situation is one reason I feel that overall production will decline at a acclerated pace as above ground factors lower production even more. Right now we are seeing above ground responses to peak oil take over one barrel off the market for each barrel lost to depletion. In time this will grow too 2:1 4:1 etc doubling at I figure between 2-5 years.
Your not including even more cash and oil that needs to be pumped into the oil industry itself because of skyrocketing production costs and declining EROI. I'd be surprised if any oil is produced in volatile regions of the world 6-7 years post peak much less the projected 50%.
This is the real reason for the Iraq war at any cost not just the depletion we are watching. A lot of places are going to go to zero quickly. It not about money its about having any oil. Very little of the remaing oil will be produced in our lifetimes if ever.
You scare the hell out of us normal persons, it seems that both TEOTWAKI and TSHTF fulfills.
Nothing surprising about what I'm saying if you hit peak oil world wide we face conditions that our ancestors use to face for thousands of years. They were not dumb people and our ability to make our recent technical leaps has a lot more to do with oil than some sort of superior intelligence. Periodic collapse of civilizations in the past plus a low energy base has a lot to do with the lack of a industrial civilization until we hit a triple play home run of the New World/Coal/Oil.
A lot of things had to come together to ignite our current civilization and we seem to forget this.
Civilizations die get over it.
Lets hope we can keep enough together to build a new better one for our children.
Mmmm, that typically takes what, 1000 years? Maybe
not such a bad thing.
Everything moves faster today :)
Seriously though we don't have the right economy to handle disruptions from oil supply problems. Everything has gone to just in time overseas production. It will unravel pretty quickly until we adjust to a older style of doing business with significant stocks of critical components. I hope and expect us to simply have serious problems with the random riot and burning slum.
In general we are in a far worse position today to deal with problems than we where even 10 years ago. I think you will be unpleasantly surprised at how fast things unravel. These last ten years of SUV's, McMansions and globalization probably increased the pain by a order of magnitude. Its like we have done everything in our power to make peak oil as painful as possible. The biggest unknown is that a lot of the people that will suffer demand destruction actually live in the same cities as the wealthy its unclear they will take dropping to a third world living standard peacefully.
Large parts of greater Los Angeles will burn for sure how this effects the rest of the US is unknown. On the east coast you have a number of the older poor cities that could potentially succumb to rioting. In the San Francisco area Oakland for example is likely to suffer riots. I think these demand destruction riots and resulting crashes in property values as people flee the effected regions will cause serious problems for the US.
I don't know Europe well enough but I'd expect Paris to have problems maybe other cities. They have good enough public transport that fuel costs are not as threatening there.
Back in the US we have a large enough concentration of poor in certain areas that depend on gasoline we are certain to have riots initiated at gas stations if they don't start for other reasons. Its hard to guess how the migration from these hot spot metropolitan areas will effect the US.
Certainly property value will plummet and business will leave the effected region the question is will it initiate a feedback mechanism causing further problems in itself. This is unknown. Near many of these poor regions is some of the most expensive property in the country so your looking at loosing a lot of wealth. America has never really had large regions that are no longer under the rule of law I'm sure we will contain the problems but at what cost ?
If your super rich and have a big house in Santa Monica I'd sell that puppy soon if you need the money. In general I'd not own anything near Compton that I could not afford to lose. Oakland I don't know well enough to guess where a riot could concentrate. Where I live in Orange County the city of Santa Anna is a potential flash enough of a concern I won't buy property in the area regardless of price. Its a double problem because its population contains a lot of illegal immigrant that work in the declining housing industry so the combo of peak oil and job loss without workers comp will make the region esp volatile. I'm sure a lot of the other poor areas in California have this same double impact situation from the collapsing housing industry and oil. Its a really bad time to have price spikes in gasoline in CA.
We have plenty of A*&Holes with Hummers in this area the chances of a Hummer being part of the cause of riots in orange county is very high.
In general worldwide riots by demanded destructed poor will be a big factor in how peak oil plays out. These riots are not the end of the world but it will fuel our downward decline. The collateral damage can easily push regions over the edge.
On the subject of riots/collateral damage, I remember a few weeks/months back where in Pakistan, people were attacking the local power utility station because of "load shedding" and blackouts.
This is the challenge going forward...people insist on blaming big oil for all their problems. So, you can easily see the leap to damaging refineries/pipelines etc.
It's the "if I can't have, no one can, rationale"
This was evident again last year(?) in the UK with the refinery blockade by truckers. It nearly caused a national disaster, and brought the country to its knees.
These gut reactions on the part of the public will likely be the death spiral of industrial civilisation.
That said, I am personally hoping for little green men to arrive and hand me the patent for Mr. Fusion. :P
I am a bit surprised that you think today's poor will be the only source of rioters.
Take today's low six figure income :whatever:, deprieve him (they riot more than her) of a job (even minimum wage, a house, all of his possessions & "savings" and even a place to sleep (except a squat in a foreclosed property). No social support before, he has developed just some minimal social network since TSHTF *like many Americans, he lacks that skill set.
I see him as a greater riot risk than today's poor.
Alan
First since their is a good chance that peak oil will help initiate a chronic recession of some other sort. A lot of these rioting poor will be former six figure incomes and hard working middle class. Economic problems will drive them into the poorer areas. Next the only reason I focused on the poor is that they are the ones who would suffer demand destruction first. In general its anyone who is living on the edge or past it regardless of income that has to work. A lot of Americans cannot suffer a few hundred dollar increase in expenses since they are in debt way over their heads. Persistent 5+ dollar a gallon gasoline coupled with attempt to use monetary inflation to hide uncontrollable rises in resource prices to keep the economy going will ensure widespread price inflation. When your customer prints the money he pays you with life is interesting.
The first people that are effected are the working poor who live with what I call the shiftless poor. And I grew up in Holly Springs Mississippi so I'm familiar with all the various forms of poverty its not just someones income.
I don't expect it to stay contained as you mention. But I would suspect the wealthier people would engage in marches and the like that will eventually be brutally put down.
One thing about suburbia its not a good place to have a old fashioned riot since the government offices are downtown you have to attack something. Suburbia either by accident or design is effective at limiting active political action.
jbunt
memmel
At first, I thought it was a typo (excusable) - (how this "effects" the rest of US) should be "affects"
then (people flee the "effected" regions) should be "affected"
then (business will leave the "effected" region) should be "affected"
and finally (A*&Holes with Hummers) shows your mindset
Why are so many posters likw you eager for peak oil? You guys want it SOOO BAAD!! You want the A*&Holes to be forced back to Walden Pond with you, where you think that everything in the world will then be right.
Well, according to this site, the A*&Holes with Hummers do not have a clue about peak oil - along with most other Amerians, so why call them that?
With respect to the Walden Pond that you desire, just look at New Orelans without power. That is what anyplace and everyplace in America will look like if there is not enough power.
All Walden Pond posters should identify themselves as such in their lead sentence.
I truly think you miss a major thread among many TOD posters (often American) - that is, the 'A*&Holes with Hummers' are going to destroy Walden Pond, along with anyone suggesting that doing so is just plain idiocy.
The other point is that many here also think what the 'A*&Holes with Hummers' believe, as compared to what they do, won't matter anyways - there will be less oil, regardless of what the 'A*&Holes with Hummers' want.
Very few people here think Walden Pond is an option - as a matter of fact, the number of such posters probably hovers around zero.
Maybe you should do some reading before writing something that seems to fit your pre-conceived notions. For example, this quote from memmel - 'These last ten years of SUV's, McMansions and globalization probably increased the pain by a order of magnitude. Its like we have done everything in our power to make peak oil as painful as possible. The biggest unknown is that a lot of the people that will suffer demand destruction actually live in the same cities as the wealthy its unclear they will take dropping to a third world living standard peacefully.
Large parts of greater Los Angeles will burn for sure how this effects the rest of the US is unknown. On the east coast you have a number of the older poor cities that could potentially succumb to rioting. In the San Francisco area Oakland for example is likely to suffer riots. I think these demand destruction riots and resulting crashes in property values as people flee the effected regions will cause serious problems for the US.'
Doesn't sound like Walden Pond to me.
The pond will shrink to the last bullfrog, pretty tough on us tadpoles.
sa is in phase 2 now - oil price down 20% from peak, production down 10%, exports down 13%? so gross revenue down 1/3 even as costs are rising fast, meaning net may be down 40% from last year's peak... and net per capita (even p/p, or per prince) down further. IMO their need for revenue will prohibit their ever voluntarily reducing production to save for the future, and opec has lost its raison d'etre... I am now convinced that all of sa cutbacks, meaning 80% of opec's, have been involuntary.
Groppe thinks there is substantial demand destruction remaining in third world still using oil for electrical power generation (eg senegal), and that current 60/b is high enough to hold prices around where they are now. He has a great record, but imo the transition from oil to ng/coal will be more difficult and slower in the third world today than in the US in the seventies because of the difficulty of transporting these alternate fuels to regions ill prepared to handle them combined with a lack of capital.
... my son will ride a camel; - there are not enough camels to go around, or grain to feed them... as in other places, there are too many sons...
Imagine that Wolfowitz has been diligently eliminating all birth control from world bank funded programs...
I don't think they have quite transitioned to phase two just yet. We have no indication of internal consumption constraints yet from KSA. Until you get pressure on internal consumption its hard to call a Phase II transition. Iran who has even more problems might not be phase 2 yet either. I assume Iran will cross over later this year or next. And KSA will cross over actually about the same time because of Ghawar. Mexico is a easier one to watch and they have not crossed yet either. Its interesting that Mexico Iran and KSA look like they will cross over into phase 2 at about the same time ensuring internal crisis will almost certainly effect exports. I assume Venezuela is later but Chavez is doing his best to get his country into phase 2 conditions as fast as possible. Back to Iran they threatened to cut gasoline subsidies but I've not seen that they have actually carried through yet.
http://www.weeklystandard.com/Content/Public/Articles/000/000/013/255wbn...
Iran will go before KSA for sure then probably Mexico then KSA. But it is a tight race.
"Mexico is a easier one to watch and they have not crossed yet either."
I don't pretend to understand how this might apply to the 'pahse I/phase II analysis, but if the chart is correct in this NYT story, just talking crude oil, 'export land' doesn't seem to be happening yet - in the last 4 years prod. has dropped while exports to US have held level, mas o menos. (Is Mexico shorting other customers?)
http://www.nytimes.com/2007/03/09/business/worldbusiness/09pemex.html?ex...
_________
Rex says, "Happy motoring!"
My understanding is exports have been dropping. I could well be wrong. If not then its internal demand that is being shorted.
Right now it looks like it still exports dropping.
http://www.rigzone.com/news/article.asp?a_id=40538
My opinion is that they will simply allow this to continue until the country goes bankrupt. I would be surprised if any country does anything to control internal demand until they are either bankrupt or exports drop to zero which ever comes first. In general I'd expect them to actually go bankrupt by the time the exports are about half what they are today.
So I'd expect financial conditions of the NCO/Governments to collapse before oil production. Of course this means little real investment in the oil infrastructure in the next few years further aggravating the situation. Sure you have a initial burst of investment when you first peak this happened in the US but once its clear that the decline cannot be averted by very expensive technical means this investment will dry up swiftly since it would require taking money away from internal government programs. If I'm right as early as next year Mexican investment in oil production will actually decline not increase then its a matter of riding the world oil price down to collapse. I think KSA is going down the same route I'd be surprised if the do any significant investments past the projects they are committed to now. So overall its simply a matter of when the price of oil internal demand and exports and dropping financial reserves result in these various countries going bankrupt.
Overall its a money game at that point. If I'm right these countries will finish projects the must and cancel the ones they can. Thats when you know the situation will play out as I've outlined.
Reports like this will abound
http://www.bloomberg.com/apps/news?pid=email_us&refer=news_index&sid=a2y...
These plans will not go through
http://goliath.ecnext.com/coms2/summary_0199-2828456_ITM
The problem is these NCO's cannot offer better terms because of their internal commitments and restrictions so they and their governments will fail well before geologic decline indicates the would.
You are forgetting Phase 2.1.
S.A. finds itself with a growing population becoming more and more unhappy with what it perceives is an unhealthy relationship with the infidel West. Falling employment rates, standards of living, water woes, and increasing radicalism all contribute to the fall of the Kingdom. With the royal family either dead or in exile, the kingdom and its infrastructure are doomed. What had been a marginally controlled collapse of exports becomes a freefall. The U.S. finds itself once again invading a country to save the oil. This time, the gloves are off. We do not have the inclination, nor time, to pretend that we are assisting the Saudi Arabians to find the guiding light of Democracy. Though we will hear little of it, the scorched earth method will cut down on pesky insurrectionists. Depending on how quickly the Royals are ousted or killed, and how angry the mobs are, me may arrive on the scene too late, discovering a smoking hole where the infrastructure used to be.
Here is where "above ground factors" get really nasty. This will be interesting.
I give this six years before total chaos in S.A. unless we do something really stupid like bomb, bomb, bomb Iran.
WT, how do you know the point at which increasing price can no longer compensate for decreasing volume?
Lots of variables--oil prices; war; domestic consumption; production decline rate, etc.
I did come up with some more numbers. If we assume a 5% net decline rate in production and current consumption of 2 mbpd (C+C), it looks like any increase in consumption of 2.4% or more per year would result in a 10% or greater annual decline rate in net oil exports. A 10% annual decline = a 50% decline in 7 years.
You are one of my favorite posters, so please don't take what I have to say as a criticism of you. I have been thinking that the big drawback to this site as far as popularizing it's views is that there is no way for the general public to get a swift idea of what the problem is. There are sites out there that pander to the public, in particular, the business crowd and talk of how reserves are replacing and exceeding production.
http://www.fullermoney.com/content/2006-08-11/MarketWatch200617-4-03-Dep...
On the surface they make simple and easily understandable presentations that seem quite reasonable and indicate everything looks if not just peachy, then fairly rosy.
In your post here you illustrate the difficulty that many have in understanding what the hell is being talked about, eyes glaze. The discussion is so far ranging and technical that I think many intelligent but teck challenged people just throw up their hands and wander off to the easy read sites.
A few ideas made simple would help, as in the thought that the oil that can be produced is the more important factor than the amount in reserve (other than discrepancies in reporting reserves). The tar sands might be a good example of great reserve but limited output. One could then move on to the idea that the situation is similar to the Saudi situation?
When Ace says: production decline rates will accelerate to ensure that depletion rate (rem) are kept below 5%.
It might be more generally readable in this form?
They will have to increasingly reduce the amount of oil pumped out of the ground to keep below 5% pumped a year to make sure that the bugger doesn't destroy itself.
I don't presume to suggest that Ace change his post, merely that I think there is a need here, from time to time, for someone with teck understanding as well as journalistic abilities.
If you find what I say so much rubbish, please don't hesitate to say so as I've got carrots to plant and a wood stove to install, much to do and so little time.
Well I'm pretty convinced that above ground factors will ensure the decline rate is much faster than that caused by peak oil alone. And people seem to at least think they understand above ground factors. I think presenting the combo makes peak oil a lot easier you show the problems then explain we have less oil every year making the problems worse decreasing the amount of oil ....
The focus is on explaining why above ground factors keep pushing us down. In reality its the reverse peak oil is what is allowing above ground issues to grow and fester but I think this is much harder to explain.
So focusing on the effects of peak oil and explaining the feedback loop goes a long way I think to getting people to understand. Global Warming for example has made positive feedback popular. People tend to understand that the warmer it gets the more the planet can warm further.
So a statement like the less oil we have the less oil we are able to pump is pretty simple. I know it removes the emphasis off of the peak but I think thats ok. Because the next statement is oil is declining. Then with that established you can talk about peak and why its declining.
Thanks pal, I'll save you a carrot.
Internal consumption would increase.
At 4% internal growth, by 15 years(from 2005) = 2MMBPD more... They consumed 2 MMBPD in 2005 (EIA here)
So you get, 3.6MMBPD. Close enough for me...one project ends early, etc.
Don't like 4% - how about a nice gradual 2% - then we get 2.7MMBPD - I am 1.3 MMBPD off. Still, getting close enough to be very worried. And that assumed everything is just dandy in KSA and they pump like mad for our pleasure.
Sorry I don't have the latest internal consumption growth numbers for KSA (and got to do some real work), so if you can find them I will plug them in for you. However, I do believe it was higher than 2% from memory.
And just in case you think that demand will be destroyed there, that would most likely be political/Royal Family suicide...in which case, this scenario is generous.
Re: Saudi Consumption
The latest EIA total liquids data, for 2004 to 2005, showed a 22% year over year increase in domestic consumption.
Ouch. Nowhere NEAR sustainable if KSA is at or near peak.. Could we see them go a crash course on electric cars, given the solar potential there?
Ouch. Nowhere NEAR sustainable if KSA is at or near peak.. Could we see them go a crash course on electric cars, given the solar potential there?
The REAL evidence for a peak would be
to see KSA go nuclear...
You said it!
http://www.nytimes.com/2007/04/15/world/middleeast/15sunnis.html
Touche.
Note that the article treats it primarily as a weapons issue (which it may very well be), but it's just as likely an energy issue for people who know the true status of their reserves and production capacity.
Because KSA isn't part of the "axis of evil," though, the weapons potential isn't getting hysterically hyped.
Thanks WT,
I don't think I need to plug in 22%.
That number is a nightmare!
Assuming 8.5 mbpd C+C for 2007, and 4.5 mbpd in 2020, suggests about a 5% net decline rate in production.
Currently, domestic consumption is probably about 2 mbpd (C+C).
So, net crude oil exports are probably about 6.5 mbpd.
For the sake of argument, if they reached zero net oil exports in 2020, this would suggest an annual increase in domestic consumption of only 6% per year, when the last available number showed 22% (Total Liquids).
Wow, want to do some scary math?
If we assume net oil exports of 6.5 mbpd in 2007 and 0.5 mbpd in 2019, this suggests a decline rate of about 21% per year in net oil exports. This assumes that consumption grows at about 6% per year.
If the Saudis show no increase in domestic consumption from 2007 to 2020, their net oil exports would still decline at about 7% per year (a 50% decline in 10 years), assuming a production rate of 4.5 mbpd in 2020.
Who was it that did a chart showing some net export declines?
22% is ridiculous -- probably reflects growing refining capacity and export of refined products rather than crude (solves the NIMBY problem) or export of other products with petroleum inputs (fertilizer, chemicals etc.)
Local petroleum subsidies won't likely remain 10yrs. If local prices match world prices, then decline in local consumption is likely to be in line with decline in world consumption = decline in world production.
I researched the numbers some in the past. KSA according to the old numbers had a per capita consumption less thant the US . At like .06 mbpd per million. While most of the ME that reported real numbers was at .11-.18 mbpd per million. The US uses around 20mbpd for 300 million giving a 0.67 mbd per million. Just using this for KSA gives for 24 million people
24*0.067 = 1.6 mpd.
using a ME number of 0.16.
Gives the more realistic figure of 3.83 mpd.
The ME countries that actually report usage correct tend to consume at twice the rate of the typical American today and near what it was in the US in the 50-60s when gas was cheap.
In these countries gas is dirt cheap so it makes no sense for them to have consumption patterns lower than the US.
This 22% hike probably has a lot more to do with corrected accounting for internal usage. I've never been able to find out how internal usage is actually reported. For example I think Russia is probably already in decline but inflating their internal usage numbers we have no real way as far as I know to verify these numbers but we do have good per capita numbers reported for the US and Kuwait for example and also lots of countries so its hard to lie to much about these numbers.
I sent several private emails to WT and posted them giving the case that KSA should have much higher internal consumption that reported. The systematic under reporting of internal use was probably easily hidden by pumping supposedly idled spare capacity to handle increases in the internal markets. Until they peaked it was not a issue just means they have probably pumped sever GB more than they have reported say 2-5GB. So consumption has probably been 40% higher than reported for a very long time. Lets say its 1mpd low this gives 0.36 GB a year so for 10 years its 3.6 GB in the past this was small change for KSA worst case its like 15GB total of "missing" oil thats already been pumped and went unreported. Generally its probably the best grades or was.
So overall I think that someone woke up and corrected the reported numbers since its now within the range we would expect. As you can see they make a real difference now.
KSA's population grew from roughly 7 million in 1980 to about 28 million today. Most of these are young. Do the math yourself.
Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett
Any idea what proportion of Saudi domestic consumption the oil industry would be responsible for?
If we expect EROEI to decline in the future, isn't that the same as saying that we expect domestic consumption to become a larger and larger share of production, as the energy needs of the oil production infrastructure increase?
In other words, declining EROEI is manifested as declining exports, as the oil production process requires progressively more energy and thus drives increases in domestic consumption by the producing nations.
This in turn implies that most "domestic consumption" of crude is accounted for by refineries, which send the refined gasoline and diesel staight back to Aramco to help with the drilling and extraction.
Comments?
If we are to believe in things we cannot see or touch, how do we tell the true belief from the false belief?
This is one of the many feedback loops possible. Actually its a generic problem. The division between domestic and export is artificial except for the subsidy issues which aggravate the situation. The problem is once world peak production happens your left with a Pandora's box of positive feedback loops. Every where you look you see escalation that results in lower oil production not only are their positive feedback loops but they are intertwined. I gave and example like this in another post of the case where bunker fuel for ships was in short supply so tankers where allowed to fuel first. Unknown to the harbor master and the captain of a container ship it carried needed supplies for a refinery without them the refinery remained closed. The last of the fuel available for weeks went to the tanker which quickly sailed its cargo to the refinery which of course was closed because of the critical parts setting on a container ship waiting for the refined product.
Its a almost infinite number of situations like this that occur post world peak which will lead to a rapid breakdown in the oil supply chain production and eventually oil production itself. Post peak a large number of solvable problems go unsolved leading to a cascade of problems.
I'm beginning to understand why positive feedback is not welcome unless your building a atomic bomb.
Memmel, you are pre-supposing that there will be shortages post-peak. What will happen is that price will adjust upwards so that demand will be reduced to match the available supply.
Isolated shortages may occur due to unforeseen circumstances, but in general your scenario is unlikely to play out in great numbers.
One thing that is not seeing enough discussion is the slope of the production curve post-peak. If the yearly global reduction in supply post-peak turns out to be relatively mild, all the survivalists and ELP-preaching / implementing people are going to feel very foolish.
Oh, everything will be peachy keen, eh?
Look at 1979-1982 please. Go look very carefully. This was the last time the world saw serious declines in oil production year over year. Then tell me what happened. And that was only a couple of years. The economic growth reignited exactly at the same time that production turned up. Coincidence? I say absolutely not. Higher levels of energy have been the driving force behind economic growth for the last couple centuries. Declining energies will mean contraction, endlessly, year after year after year.
Yes, prices will get higher but what about those that find themselves priced out of the market? What happens in the 8th or 9th year of straight declines when you cannot get oil at all and your house is a 30 mile commute from work, you owe $350,000 on it and you've taken two salary reductions already just to stay employed? Ever heard of upside down mortgages? What happens when massive amounts of mortgage debt, which has been repackaged and sold as "securities", goes bad? Who else gets dragged down?
It is amazing that we see posts like what this every day yet people like you fail to take note of history. The US and world had plenty of resources, plenty of people who wanted to work and were willing and able, yet after the Great Depression began they could not work. They got thrown out of housing to live in shanty towns. No one could hire them because there was no medium of exchange that allowed for economic growth, and economic growth is the ultimate of Ponzi schemes, always dependent on increasing population and increasing consumption, actions which can be mathematically proven are unsustainable.
But go ahead and continue to believe in the fairy tale to which you cling. Once peak is reached and the downward spiral begins in earnest there will be no turning back. You know this, deep in your gut you know this, but you are terrified of it so you invoke every hoary superstitious image in your personal pantheon in an effort to keep the bogeyman at bay. I've got news for you, reality doesn't care what you believe.
Finally, let's take this gem:
Tell me - absent monetary inflation, exactly what is rising price except a shortage of goods in the market? Yes, that is exactly what rising price in response to less available goods means - a shortage.
Do you want to try this entire discussion again, this time with your eyes wide open?
Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett
Greyzone,
Agree with you completely. Although this is my first
post to TOD, I've been lurking for over a year or so, cutting my teeth with the dieoff, Energy Resources, etc.for the last five years.
I'm a retired mechanical engineer and rancher, vividly aware of peak oil for the last 20 years or so after listening to a eye opening lecture at CalTech which piqued my interest in finite energy sources.
Personally, I think the next five years are going to be real eyeopeners and will catch 99.99% of the population with their pants down.
Enjoy your posts.
Blair in Oregon
I think you missed my point. No knock against you GreyZone, but there are some people here who are so desperate to believe what they want to believe that they see what they want to see.
To reiterate, I said:
I stand by that statement. If the decline rate is mild, prices will go up, and we will respond by becoming more efficient. Yes, certain parts of the world will feel the pain more acutely, but there there is so much potential for efficiency improvements that the developed world will ride down the curve relatively unscathed.
Now, if the post-peak decline rate is extremely rapid? That's a whole other ball game.
This brings to mind some of what's missing from the peak oil discussion, things like an analysis of what decline rates might be post-peak, an analysis of how rapidly energy efficiency can increase due to price increase, etc. We have data points from the oil shocks of the 70's, and also more recently from the recent run-up in oil prices which has encouraged efficiency improvements world-wide. Quantifying some of those improvements and making some predictions based on them would be a very worthwhile endeavor.
Finally, I must address this quip:
I must disagree with this statement. The price of oil has more than tripled over the past few years. Do you see global shortages in oil right now? There are people out there who would buy more oil at $50/b than they would at $60. There are people who were buying when oil was $20/b and are not now at $60/b. Does that mean they are experiencing a "shortage?" Of course not. Price regulates the quantity demanded. As long as prices are allowed to increase (no arbitrary price controls) then there will not be extensive shortages, even post-peak.
You have got to be kidding me. No shortage right now? How do you think prices got this high? Just because YOU don't see the shortage directly does not mean it is not there. Indonesia has fuel riots, for gosh sakes. Other countries have completely stopped buying oil.
We have had increasing demand in the US, increasing demand in China, increasing demand in India, stable demand in Europe. In contrast, many third world nations are experiencing shortages. That's who the shortages affect first - the poor!
Yes I do see global shortages of oil. It is evident in Indonesia, China (KSA cutting contractual deliveries), India, throughout Africa, South America, even in places here in the US. If you don't see it then you are simply refusing to open your eyes.
My gosh... next you will tell me that these price increases are part of some oil company conspiracy!
Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett
GreyZone, it's difficult to have this conversation with you as it's clear that you have less background in understanding how global financial markets work. That's not a knock against you; we all bring different knowledge, talents and experience to the discussion. I just don't have time to write a lecture.
Some of our misunderstanding could be due to differences in terminology. Perhaps when you say 'shortage' you really mean excess capacity? If you say that excess capacity now is far less than it was a few years ago and this is one reason for the run-up in oil prices I would agree with you.
However, 'shortages' in the classic sense imply something else. Shortages imply consumers being turned away from gas stations due to lack of gasoline / diesel, oil tankers being turned away empty due to lack of oil, etc. This is just not happening on a global scale.
However, if one were to artificially prevent prices from fluctuating naturally by placing an arbitrary price cap on oil, then should demand increase or supply decrease then yes, one one see shortages. This is not what we are seeing, as the fluctuating price acts as a lever to ensure that demand always equals supply.
Ener Ji
I think I should sic memmel on you he will talk to you like a Dutch uncle and then you can come and grow carrots with me, okay?
Using GreyZone's term 'shortage' in your classic sense one may construe:
'Due to the reduction in excess oil production capacity there is a 'shortage' of homeless people on the street.'
I think your global financial markets are very good at marginalizing and then dismissing. As the pond shrinks life at the edge dies.
I once had my economics 100 teacher to the point of admitting that money is wealth using his own premises but, to the sound of much class laughter, he slipped away with a knaves trick of not answering. I think you are doing a similar thing in not considering the effects of 'reduction of production capacity' on those at ponds edge by not answering for the effects on them.
I have to agree that the rate of decline is the all important variable. It would nice to see a key post on this issue. A low rate of decline will allow western society to "mark time" - that is no growth while total energy supplies remain constant and oil is replaced by alternative supplies or conservation. I think that a decline rate of 3% should allow this - what is the logic of three percent. Simple: we have approx 3% growth in western societies at the moment and constant oil supplies (constant since 2005) - this implies energy efficiency/alternative supply is able to enable to provide for 3% growth. I think Stuart may have published something a while ago on TOD about the rate of substitution possible, anyone know the post?
Very high decline rates - 10% or so could cause near collapse of society - so I think it is pretty important to know what the decline rate is likely to be.
I don't think you have included, in your vision, the effect that increasing environmental degradation is having, of course the 'system' has no concern there, does it, in fact I imagine the New Orleans disaster works out to be a goodly part of that 3% growth factor. The hurricane's effect being merely an externality. Minus 10%,??? 0% and we wither and die.
We have built a house of cards predicated on an ever increasing energy supply and growth in 'wealth'. I think we have good reason to be nervous. I have been involved in the market as an investor for 20 years and have the same hollow feeling I had 6 months before the dot com. bubble began to pop. My broker, of that time, merely said 'tish tish avarice will provide'. I got out with half my skin that time I don't know what will happen tomorrow (do you Mr McGarrity?).
I don't see much comfort in your thoughts that our Cutthroat *hole Fridman Capitalistic World Corporate Growth (anyone know how to capitalize an asterisk?) may be extended using alternatives but I am going to take a look when I have time to see if there is that article by Stuart you mention, if the search on this site works as well as the rest of it does (kudos to Super G) it shouldn't take too long.
I think home growing of carrots will be a growth industry in the future economy.
Capitalism is a positive feedback system - think about it.
This may be one reason so many people who grasp this instinctively overreact.
But America is a very special case, where free market capitalism has also assumed the role of a religious totem for many, an answer to all wordly concerns. Even the term 'invisible hand' plays into this.
And yes, it has been my opinion since roughly 1981 that the U.S. has been following paths likely to lead to pain a magnitude greater than necessary, in part because the alternatives would seem to be contrary to the demands of a capitalist system, as understood in the American context. Small has never been beautiful in America, after all.
Hello WT, Darwinian, and other technical TODers,
I greatly appreciate your postings--hope it continues for a long time. But what worries me is a future TOD brain drain: as PO becomes more data obvious, Peakoil Outreach continues to spread, and resource shortages, blackouts, and violence keeps increasing in blowback force-- we will start to bail out from posting to direct our efforts to our own personal and family ELP-- perhaps TOD needs to help others prepare by encouraging libraries nationwide to archive TOD on CDs or print hardcopies for those that wish to inform themselves and others later. Obviously, the librarians would need to print out the weblinks too before they go offline forever from Olduvai Gorge.
Do you think we need to start an email campaign to our local libraries pleading for them to archive TOD, or do you think we still have plenty of time for them to download & printout TOD later?
My guess is that my local branch spends a lot of money for crappy 'Iron Triangle' copies of People magazine, Vogue, Yachting, and other pointless dead-tree info. They could easily stop these subscriptions, then divert these funds to archiving TOD for display. I think this would help spread Peakoil Outreach more rapidly potentially saving many future lives.
I asked about leaving Thermo/Gene handouts for free dispersal, but the librarian told me that this was not allowed on public property. Spreading Peakoil Outreach to newbies by one to one verbal facetime is frustratingly slow [but I must admit quite satisfying when I see them get that 'thousand yard stare' from the initial comprehension]. I got to 3 young adult newbies yesterday in a Mexican restaurant. =)
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Bob Shaw said:
"we will start to bail out from posting to direct our efforts to our own personal and family ELP-"
Yes Bob and that is one of the main reasons I no longer intend to do much if any further posting on TOD. Too busy, far too busy to listen to rants and raves by egoseekers who just put in time to preen their feathers and denigerate anyone who gets in their way.
I am extemely busy and will have basically very limited time to do other than lightly peruse this site now and in the future,if at all.
In the past I tried to post what I 'observed' out here in farming country BUT for most here is was so far from their understanding as to be a worthless attempt on my behalf as well as taking a lot of flak over what I portrayed as the farmers responses to the future crisis.
Once more then I will state it for the last time.
If anyone thinks they can just walk (or run) to the nearest farmers grain bin or to his fields where the animals graze and just blithly help themselves they are very very sadly mistaken. There will be NO National Guard robbing anyone for YOU. Your really not that important.
If you are not ready to provide for yourself in this future period then you surely must not expect others to do it for you and they simply will not. All the bs about Darwin will be seen as to its truth or not when this all gets started.
Wake up folks and smell the burndown.
Airdale-no need to answer,I likely won't be reading it.
Spring weather has put everyone way behind. If this is the makeit or breakit year then its not stacking up very well in AG. Thousands of dead acres being sprayed down, or bushogged and replanted. Just in time to later hit the pollen killing summer heat(for corn). Massive dieoffs of animals who need nuts and mast to survive and lay up for the winter. Bad peas all around. Bees get a double blow. No one here seems to really understand that FOOD is going to be all that matters.
Talk all you want but sustenance deals the joker and has all the hole cards.
Airdale,
I appreciated ALL of your posts and will miss them, but definitely understand what you are facing. I too am finding that I spend too much time on TOD, time that I should be putting into ELP. We've made lots of progress, but still have much more to go before I even begin to feel "okay"-- whatever "okay" means. Every time I read one of your posts, I realize just how much we still have to do.
I wish you the very best and hope that you will still post on occasion as your posts are very valuable to those of us trying to become self-sustaining when it comes to food (and survival).
All of the bad news about crops this year, combined with the bee problem and water problems should have everyone concerned. Instead, most people I talk to aren't even aware that they are problems.
Take care Airdale!!!
Cheryl
Airdale, sorry to see you go, I found your posts informative. I'm putting together my own small farm in France and the feedback from others doing similar things is invaluable.
We're receiving different type of weather here in Europe with temperatures over 20celsius (68 fahrenheit). Seems we went from mid winter to mid summer and skipped spring, everything is in bloom, but few bees around. Not sure what this means for the rest of the year, but its sent me into a frenzy of activity to catch up. Lack of rain means the ground is already drying and its only April, so I bought a 1000 litre water tank yesterday to ensure I can keep my beds watered.
I would think Europe will have a good early crop, but not sure about the rest of the year. When it comes to food, I think climate change poses the greater threat than PO. The combined effect of economic, energy and weather related problems may just be too much for agriculture to withstand.
Agriculture may well move on to horticulture on a massive scale in order to control environmental aspects. Wow! That would need lots of energy and money... opps!
What is to become of agriculture? Is this the really elephant in the room?
In the biggest norwegian farming magazine Bondebladet (literally "the farmermagazine") there used to be for many years an american correspondent writing, a monthly culoumn I think it was, about what was going on in american agriculture. For me atleast your posts give much the same insight, and I have appreciated them.
"I got to 3 young adult newbies yesterday in a Mexican restaurant. =)"
Just to sit in and listen to one of those conversations would be priceless.
-best,
Wolf
Hi Bob,
Just an idea: Are there any co-ops over there?
WT,
What would you estimate the threshold of demand destruction is from developing countries? ie. How much would likely be trimmed elsewhere before moving higher up the oil chain?
I ask because it could be predictive of when price/demand shocks will occur in each tier of world countries.
Typo ... and no edit left.
" = 2MMBPD" should read "= 1.6MMBPD"
That plus 2005 consumption of 2MMBPD = 3.6MMBPD.
This is probably saying the same things that you said Ener Ji, but I'll make this post anyway.
What I find interesting that just about everyone misses, at what point is a oil producing country going to stop exporting their products and keep what is left for them selves. How many years do you think they are going to keep in reserve? I bet that it will be in the GB numbers, so total reserves are still not a valid number when considering products for exporting. Just a thought ;).
Think of Russia at first.
Russia probably will go this route but they have a industry outside of oil/gas. But it makes more sense for them to simply keep producing and investing in their internal economy and let internal demand erode exports. Their is no real reason to cut exports that I can see. I could see them cut investment into expanding or maintaining which has the same effect of withholding oil. So what probably will happen is they will simply continually lower investment as oil gets more expensive driving production cost higher and over all this is what initiates a vicious cycle that leaves the oil in the ground. The effect is the same but I see no reason for a determined policy to conserve oil it will happen on its own accord.
Eventually of course since even Russia economy is primarily fueled by exports it will begin to collapse but at that point they would have blown all the money they should have spent on their energy infrastructure.
In general the oil exporting nations will probably fare worse after peak oil with the exception of Canada and Russia which both have other large resource reserves and a low population. On the intrinsic wealth/technology scale its probably.
Russia
Canada
US/Brazil
South Africa
Europe
Other South American countries
Africa
Western Asia not China
Central Asia
Middle East
China/India
Notice China and India vie for last place since their huge
population become a big problem when no one wants to buy cheap plastic junk and food exports collapse.
I am always surprised to read things like this:
What does make the US/Brazil better prepared than Europe? Is it Ethanol or is it the low EROI, rapid declining lower48 production?
I would presume that in a peak oil scenario the countries that could better cope with the declining oil imports would be the most energy efficient ones and with the lowest debt level per capita. To be honest with you I don't think the US fulfills either requirements.
The European Union original 15 countries produce 30% of electricity from nuclear (France 80%, Germany 40%), 16% from renewables (Austria 60%, Norway nearly 90%, Italy 30%) and the remaining 54% from Natural Gas and Coal.
Unlike North America the Natural Gas supply for Europe is not declining yet and it is very unlikely to reach its peak in the next two decades.
The EU relies on already existing pipelines for its gas imports from the FSU and North Africa. Most LNG regas projects are now underway to provide backup capacity rather than anything else (only the UK has serious NG import and storage infrastucture problems).
The oil consumption in Europe has been almost stagnant since the '90s. The average fuel efficiency of a european car is 38 MPG, roughly 50% of the car fleet is now made of direct injection diesels (with a mass of less than 1000kg) that can drive at 40-50 MPG. Some new diesel mini-cars can already reach 70 MPG and those are selling fast. In addition to this about 20% of taxis in Austria, Italy and Spain are already powered by Natural Gas.
It is now possible to travel by train from London to Paris in 2 and a half hours, from London to Rome (1800 miles circa) in less than 12 hours. Some projects already in advanced state of construction will further cut this time down to 8 hours. Italy alone has 16000Km (about 10000 Miles) of electrified railways covering a country the size of Florida; (France has 40000KM of electric railways).
London is buying 6000 diesel-electric in-series hybride double decker buses to backup a mass transport system of 14 underground lines already capable of commuting 9 milion people per day.
Or maybe I can tell you about the city of Leiden in the Netherlands where I have seen at least 10,000 bicycles parked in front of the local train station.
I can see the EU easily cutting its oil consumption by 50% in the next 15 years without a major breakdown in society.
But I am sorry I can't really say the same for the USA!
I've heard this logic before and can't say I agree
100%. The premise is that exporters will curtail
domestic consumption to make "money". That's such a big kettle of fish that it can't be addressed in a simple
post, but...why? To make dollars, an increasingly
empty paper promise?
The premise is that dollars are a store of value,
obviously dubious. Or a means of exchange-only if
you do so quickly, or with someone who doesn't otherwise
denominate their transactions in dollars(unless you
need to buy a big pile of weaponry quickly).
Same logic applies to euros, yen, etc., to a greater
or lesser degree. No?
Where the heck is Don Sailorman?
Unless you're running a closed economy, you need money to trade with outside nations. You need money purchase those things that you can't or don't produce domestically. For many oil-producing nations, their primary export is oil. If they wish to continue importing goods (think food, medicine, technology, consumer goods, etc.) then they will have to maintain oil exports so that they have something to trade with.
What seems to be missing from this discussion (and most peak oil discussions, unfortunately) is the impact of price. Prices will increase substantially post-peak, and the domestic consuming population of oil-producing countries will have the same incentives as the rest of the world to conserve and become more energy efficient. While it's true that many countries subsidize the cost of refined oil products for their domestic markets, as prices increase these subsidies will have to be reduced so as to 1) not bankrupt the government, and 2) send the appropriate price signals that the populations needs to conserve and become more efficient.
Any 'projection' of increased domestic oil usage post-peak are extremely flawed without analyzing how much oil prices may rise, the corresponding drain on state finances to maintain subsidies, and the long-term strategic imperative to reduce domestic consumption so that there is sufficient oil to export. Without sufficient oil to export, there will be no money to import.
As far as I can tell the plan seems to be to subsidize until your bankrupt. This seems to be what Iran is doing. They threaten to unwind subsidies but are unable to carry out the move. Indonesia
http://www.mises.org/story/1906
http://peakoildebunked.blogspot.com/2005/10/120-gasoline-subsidies.html
And recently.
http://english.people.com.cn/200611/09/eng20061109_319937.html
Understand Indonesia is no longer a net exporter of oil and they are having a hard time eliminating subsides I can't image trying to do it while you still have significant exports. No one has tried.
I posted a recent Iranian link already. They talk about it
often.
Venezuela is digging itself very deep into the subsidy grave.
Overall we have the example of Indonesia that only cut after they became a importer so any argument that a country will cut subsidies early would need at least one example.Mexico ?
This is an interesting discussion. Oil-producing countries face a dilemma when they peak: 1) cut subsidies to encourage efficiency and protect exports, or 2) maintain subsidies at great financial cost, reducing exports and ability to import goods and services that the population also demands.
Quite a dilemma! My prediction is that eventually they will have to unwind some of these subsidies, and that some of the later countries to peak will (perhaps) learn some lessons from the mistakes of the initial countries to go through this.
I suspect that TPTB in each country will simply keep subsidies up stop investments in infrastructure and bleed as much money as they can out of the country. When the crisis hits they bail. I'm pretty sure a lot more Saudi Royalty will be living overseas in the near future. We don't actually know what the Mullah's in Iran do with the money. Nigeria has been on this path from the beginning. I suspect Russia is the same way.
So It will be run it as long and as hard as you can and when you can't bleed the country then bail.
Very few of these governments have the popular support to do the right thing. Lets watch how Mexico handles it they will hit the wall first I think. I'm sure KSA will be doing the same.
Hi m,
re: "When the crisis hits they bail. I'm pretty sure a lot more Saudi Royalty will be living overseas in the near future. "
Q: Where do they go? And Why?
1) Is it a case of "away from home, no one will recognize you and you won't be a target" - ?
Or is it -
2) "Somewhere else is better/more livable...?", which seems a dubious premise.
A good chance the US or England or both. The own property all over the world. I'm not sure how much time the royal family outside the king spend in KSA today. People with that sort of wealth are simply beyond my understanding in the sense of where they live is a nebulous concept. As far as targets people with this much power are always targets for assignation so I'm not sure it changes the situation much for them.
Its loss of power and future earnings that they would have to deal with but once the excess revenue dries up future earning are bleak. I think a lot of people don't realize that the NOC are based on the concept of outrageous profit margins say 1000% profit from oil. As these margins drop even to what we consider ridiculous levels it has a big effect on the net cash flow from oil. The up front costs of extensive oil development projects is a problem for many if not all NOC's. Even KSA is suffering sticker shock these days. And of course internal needs are increasing exponentially and on top of this the real purchasing power of the dollar is falling off a cliff and most of these countries have large dollar reserves. Not only is the dollar dropping relative to other fiat currencies but all of them have had a insane about of monetary inflation recently.
And we have seen price pressure across the board.
The interaction of this debt based monetary inflation and negative growth with price inflation in perishable items and deflation in asset prices effects everyone we have a global economy the economies of oil produces and consumers are tightly intertwined. Rising oil prices ten to result in a slowing of the flow of money as it has to go for oil purchases then through the oil companies and governments before finally being reinvested. It does not change the absolute amount of money. I don't care if a Saudi or American gets the next billion dollars I do care that by routing the money back into KSA it takes a long time before its reinvested and the is "real money" not debt. So the net effect is to take a lot of cash out of the system by slowing the velocity of money. China reserves have a similar effect.
how 'bout the us model : subsidize consumption and print money and more money and drop money from helicopters to maintain consumption
Dear Ener,
I cannot recall even one nation that curtailed domestic consumtion BEFORE they had nothing left to export and instead started to import the oil.......
Roger From the Netherlands
Perhaps that's because most of the nations we've been tracking who have peaked have had relatively diversified economies and did not rely exclusively on oil? I'm not sure, just a thought. My feeling is that an economy that is wholly dependent on oil revenues will not allow domestic consumption to keep rising so as to maintain exports for as long as possible.
Mexico may be an interesting case study, although their economy is diversified enough that I wouldn't say they are wholly dependent on oil exports. I'm thinking primarily of the major producers in the Middle East. The smart ones are rapidly trying to diversify away from oil, but it's not an easy thing to do.
I'm visiting my happy place first two weeks of June. It's in the southern hemisphere.
Good luck, Matt. I hope it works out as you wish.
Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett
Would it by chance be in Patagonia? I've been studying the map quite a lot, and I think that's where you're heading... Best of luck to you anyway!
Matt gave himself away a few months back when he posted a pic of the International Space Station! BYOB dude!
Hi Matt.
What's your take on St. George's island? I understand the British maintain a small garrison there. Could one at least visit if one were so inclined? You'd probably need to use sailboat transport to get there.
Oops.
I meant South Georgia Island (in the South Atlantic). And never mind.
The US Military should be clearing the way for you within the next couple weeks. Vios Con Dios.
Sweet.
Post pictures, GPS coordinates....:-P
Aren't happy places great! I'll be spending the better part of the next 4 months at mine.
Ace,
I have been waiting for this post
You state that Saleri says “Our typical depletion rate is about two percent” but he asserts this is only in the context of fields currently under production. Read http://www.saudi-us-relations.org/energy/saudi-energy-saleri.html to confirm this point. In other words, the “typical depletion rate of 2%” relates only to the initial reserves of those fields, not to the entire initial reserves of Saudi Arabia.
This means that he is specifically excluding fields which are not yet in production (eg Abu Hadriyah, Khursaniyah, Fadhili, Khurais, Manifa, Shaybah extensions, Nuayyim (and other Hawtah trend fields), etc).
By your reasoning, would this not mean Saudi is implying that the initial reserves of all fields currently in production is about 175 Gb, with remaining reserves from those fields of about 65 Gb?
On another note, Saleri clearly states in the above presentation that recently developed fields such as Shaybah and Haradh III have been developed with MRC smart wells, and that these wells can produce at much higher rates than they currently do. Though he doesn’t use the exact words, this implies to me that these wells are being deliberately choked back in order to maximise the long term production of reserves rather than to maximise production rates today. I have made this argument before here on TOD and been flamed for it, but I do think it is one worth exploring again.
Having said that, however, I ask myself why Saudi would go the expense of developing further Shaybah extension fields, if they could simply increase production by opening choke valves on the existing Shaybah field, where they claim they can produce 1 mm bpd, rather than the current 0.5 mm bpd. This is one for the reservoir guys out there to answer.
Since the original Shaybah field was developed with smart MRC wells, how much of a difference would it make to ultimately recoverable reserves if they produced the field at “full bore” rather than choked back? Intuition tells me that they would lose some production, but that this amount would be relatively limited by the technology of the smart MRCs. Isn’t it the point of smart MRCs that they can be shut off the moment that water becomes a problem, and thereby maximise the ultimate volume of oil recovered?
If this is the case, why not simply pump Shaybah at 1 mm bpd, and save the development of Shaybah extension (and other) fields to a later date?
As usual, I have more questions than answers, for which I apologise.
Not likely. However it doesn’t matter all that much. Historically 90 to 95 percent of Saudi production has come from those giant fields. Assuming he was talking only about those giant fields, then that would still mean that they were depleting at a rate of at least 1,8 to 1.9%.
Actually I think Saudi actually believes they have over 265 billion barrels of proven reserves with another 200 billion of probable reserves. If this is what they were talking about then 2% would be about 9.3 million barrels per day.
Ahh, but all those fields have previously been in production. Some, like Khurais, was closed down because of very poor production. Khurais was closed down after a massive gas injection program failed to increase production. A couple of others were closed down because of very heavy sour oil. At any rate none of them produced very much oil when they were shut down. Khurais, at its peak produced 144,000 barrels per day. And after the gas injection program, they were producing less than half that when it was closed down.
Indeed if that is truly the case then Saudi Arabia is in very deep doo-doo. All those other tiny fields just don’t have much oil in them. If their giants are down to 65 Gb, then all Saudi has less than 75, Gb.
A very good theory but there is absolutely no evidence to support it. In fact all the evidence suggests that, at least in the case of Haradh III, they are producing flat out.
You are forgetting one very important point. A given well, in Haradh III, all other things being equal, a well in Ain Dar will produce over 4.5 times as the same well in Haradh III. That is because the Average Productivity Index (barrels of oil per day at a the same well head pressure) is over 4.5 times higher in Ain Dar as in Haradh. Therefore if a maximum contact (bottle brush) well in Haradh III is producing 10,000 barrels per day, as they claim, then that would mean the same well, at the same pressure, in Ain Dar, would produce 45,000 barrels per day. As you know the wells in Ain Dar are producing at between 5,000 and 6,000 barrels per day, though they are not MRC wells.
But at such a very low productivity index and still producing 10,000 bp/d I would consider it extremely unlikely that Haradh III is choking back.
The average productivity index in Ain Dar is 141 while it is 31 in Haradh.
http://www.gregcroft.com/ghawar.ivnu
Everything in Ghawar gets smaller as you move from north to south, Porosity, Permeability, reservoir size and Productivity Index. Meaning that there is just a lot less oil in Haradh than in Ain Dar, and that it is a lot harder to extract. I find it absolutely amazing that they are able to install bottle brush wells and get 10,000 barrels per day from each well. But to suggest that they could get a lot more from them than that would require extraordinary proof.
Ron Patterson
Ron,
I know most of the megaproject fields have previously been under production, but Saleri explicitly states that the 2% relates only to fields CURRENTLY under production, which none of them are. I therefore maintain that the 175 Gb intial reserves number should only apply only to fields currently under production, not to the whole of Saudi Arabia.
I have followed the Ghawar threads very closely and am aware of the points you make above re Haradh III. I am not saying that Saleri is telling the truth and your point about comparisons of porosity, permeability, viscosity and Productivity Index is very valid.
Saleri's implied claim of choking back wells seems to apply more to Shaybah than Haradh III. However, I find it illogical that they would spend billions developing extensions 1 and 2 at Shaybah to bring on line a further 450 kbpd, if they could simply open the chokes at the exisiting field to provide the same result.
Furthermore, oilfield development cost inflation is being driven by Saudi demand for rigs, engineers, etc. It would surely benefit them to delay the development of the Shaybah extensions thus cooling the market for oilfield services. If they can produce exisitng facilities at Shaybah at 1 mm bpd as they claim, then in theory they could knock back the extensions by at least 10 years with no loss of production capacity. So why rush to develop the extensions?? It doesn't make sense.
Although there have been many excellent posts about how KSA is near peak or maybe on decline, I do think that there remains some doubt about whether all wells are producing flat out. In that respect I agree bunyonhead's point that perhaps there is some spare capacity.
And don't forget, there is a US election coming up next year, and could it be that KSA is reserving some capacity to help Bush allies?
Do you have any thoughts on world C+C production rates in 2020? I would be inclined to believe than Iran is in a similar condition to Saudi Arabia, based on Bakhtiari's statements about reserves.
Iran is in very poor shape. Today infrastructure issues are probably the biggest factor in their ability to produce. Any prediction for Iran's production base on their depletion profile which is itself very troubling is probably highly optimistic. I think GW is only interested in their nuclear program not their oil its simply not even worth invading.
Iran is close to having to pull a North Korea and use nuclear blackmail to maintain their government. Food will be a huge issue for Iran within a few years.
This is old but you get the picture.
http://www.photius.com/countries/iran/economy/iran_economy_imports.html
And of course one of the world major exporters is toast literally.
http://www.smh.com.au/news/national/give-us-water-or-prices-rocket/2007/...
http://www.dfat.gov.au/geo/iran/iran_country_brief.html
And of course the US ethanol program will remove a significant amount of corn from the worlds grain markets.
Iran is worried about starvation thats why they don't give a rip about the US or the world. GW plans to let them starve without nuclear weapons. A calculated strike to destroy
their oil production will help. The only downside is if
Iran opens up completely to Russia or China to avert its
coming collapse. The either need to use nuclear blackmail
or give up all their oil just to feed their people
in the near future. My best guess is the US is willing to
give Iran to China or Russia since its not really that great
of a prize we are just gaming it right now. I suspect a lot of key Democrats are getting briefed on the real situation in the world right now. Expect them to fold soon and let the war in Iraq and build for stopping an attack on Iraq post bombing to continue.
You are missing one HUGE point, Iran has the world's second biggest natural gas reserves in the world.
In trillions of cubic metres (TCM), Russia is first with 47.57 TCM, Iran 2nd 26.62 TCM, Qatar 3rd 25.77 TCM. https://www.cia.gov/cia/publications/factbook/index.html
One cubic metre of NG is 37 MJ or 35,100 BTU. A barrel of oil is 5,800,000 btu. http://hypertextbook.com/facts/2002/JanyTran.shtml
With NG reserves of 160 billion barrels of oil equivalent, you may wish to rethink your "best guess is the US is willing to give Iran to China or Russia since it's not really that great of a prize."
Who is going to produce this NG ?
LNG facilities?
How many billions need to be spent to turn this gas into a product for sale ?
Under what terms ?
And they need a lot of the NG for internal GTL use.
And you need to do this with large population with no food or gasoline ?
These NG supplies won't be developed any time soon or at least not with the current government of Iran in control.
Right now we can't even fully develop the other large NG reserves in the ME because of the LGN issues and this is with basically all the money in the world and a willing government and wealthy population.
The promise of LGN is one of those things that will always be just around the corner even under the best conditions.
I think we are happy for Iran to be Russia's or more likely China's Iraq. Second prize in the oil wars is not that appealing. And the US can take Venezuela anytime we want which will be esp hard on China if China becomes dependent on Venezuela for oil. By taking Iraq we have the world by the balls. Only Russia's control of Europe matches our position. But who is putting in a missile defense shield ?
China and esp India are not going to win this one.
America's invasion of Iraq is bad wrong evil etc but its the most brilliant strategic move you could make as the resource wars unfold. I'm sure we will soon allow mercenaries run by the oil companies in to secure oil production they won't be under the same rules of engagement as the us military forces. Soon the US needs a break down in government in Iraq to hide the use of harsh methods to ensure oil supplies.
The Democrats are playing right into the hands of GW if they are now going for plan B. If we decide stability is a failure plan B is not pretty.
I completely disagree with you about LNG (liquefied natural gas). It is a mature technology. Costs are increasing for the same reasons that oilfield costs are increasing. The rule of thumb used to be that LNG was deliverable at $2.50 per mmbtu. Assuming huge inflation, it is still possible to develop a full LNG supply chain (liquefaction, transportation, regasification) for under $6 per mmbtu delivered, which equates to less than $35 per barrel of oil equivalent...
America prefers for Canada to use NG to create synthetic oil from Tar Sands, which seems illogical to say the least. Of course, the American problem is that it is impossible to get planning permission to build a regas terminal anywhere but on the Gulf Coast
Natural gas is a very flexible fuel, it can be converted to liquids (GTL) for automotive transportation purposes or burnt for heating or power generation. There are almost no waste products, and it is environmentally cleaner than oil. Rasgas in Qatar is developing technology to use NG to manufacture Jet Fuel. What's not to like?
I guess we will agree to disagree.
I'm not talking about projections and cost analysis I'm talking about the willingness to actually invest the billions needed to develop a fungible LNG trade. Its not happening.
And esp not in Iran.
And it never will.
This report is old.
http://www.eia.doe.gov/oiaf/analysispaper/global/index.html
But feel free to find evidence that LNG growth is on schedule according to estimates. Especially for Iranian reserves.
This is the reality I see.
http://www.rigzone.com/news/article.asp?a_id=43558
http://www.neurope.eu/view_news.php?id=72740
http://www.imakenews.com/lng/e_article000760746.cfm?x=b96T25P,bd1Rfpn
http://www.lng15.com/index.asp?urlgo=newsletter211
http://www.researchandmarkets.com/reports/354359/lng_north_american_proj...
From the rig zone article:
Worldwide, we consume this much energy, from fossil fuel + nuclear sources, about every five days.
"Worldwide, we consume this much energy, from fossil fuel + nuclear sources, about every five days."
You so frequently expose the optimistic bias inherent in the large numbers thrown around by cornucopians. It's all about the big picture perspective, and humans are generally terrible with exponentials and big numbers.
So, do you think it will be developed as scheduled, and will the necessary investments be made? Am I completely mistaken, or is this the gas for whose transportation the Iran-Pakistan-India pipeline is planned? And do you think that's going to happen?
I'm not asking these questions because I'm trying to make a point but because I respect your opinions. ;)
Memmel had the link up the thread to the Rig Zone article, regarding a LNG project. Total is having very serious doubts about proceeding, because of skyrocketing costs.
This is the same pattern that we are seeing worldwide--from the ultra deep stuff in the Gulf of Mexico, to the tar sands in Canada, to the GTL projects in the Middle East.
And Shtokman. Bakhtiari's article on the Shtokman Saga is quite revealing. It would be such a huge undertaking that he doesn't really think Gazprom can pull it off. So much the worse for us here in northern Europe.
the trans alaska pipeline was at one time in doubt because of rising costs and technological problems as well but it came to be. maybe the majors just got lucky ?
There is a good documentary on the building of the pipeline. Lots of footage and interviews. It was a miracle and the impression I received was building the next one for the proposed area is a "pipe" dream. Cost and logistics compared to the APL. Costs alone will be huge as will keeping people on the job when the hard stuff hits. Aired on PBS.
Quid Clarius Astris
Ubi Bene ibi patria
There are several Iranian LNG & NG projects:
OMV has already signed an intent contract for South Pars LNG development
http://www.eux.tv/article.aspx?articleId=6789
Shell is proceeding with their own project in South Pars
http://www.presstv.ir/detail.aspx?id=5114§ionid=3510101
Iran-Pakistan-India pipeline is also likely to move forward, even though it looks like more uncertain
http://www.atimes.com/atimes/South_Asia/ID19Df01.html
Moscow has its own interests of course.
Unless somebody attacks Iran (not out of the option, considering what happened in Iraq), I think Iran NG resources will be "peacefully" developed for increased exports.
Expensive? Slow to ramp up? Yes, but still developed.
I did this calculation in mid 2005 and $6.00/kcf was marginally possible at that time with cost of money at 6%. Two years later, and no one in his right mind would assume the risks involved at near 6%, better think in terms of $8.00/kcf and climbing.
Thats the message I'm trying to get out. Costs will skyrocket projects will be delayed higher oil/NG costs will raise project costs causing even more delay...
A big part of the problem is actually our fiat currency systems. As oil goes up we print more money to pay for it trying to boost the GDP but this actually causes the price of oil to lag inflation so costs rise faster than the oil price. Basically the real inflation adjusted price for oil is lagging behind the price needed to spur investment because costs are rising faster.
Current monetary practice is thus able to suppress the true cost of oil today but it makes it increasingly hard to solve the problem. Generally this is why your seeing money poured into leverages buyouts and stock buybacks rather than infrastructure investment the oil industry is no different.
Peak Oil just keeps us stuck in this pressure cooker. If we had a lot more oil we would instead see the money going into real growth.
The underlying problem is of course the people consuming the oil get to print the money to pay for it and real economic growth has stopped but this won't last forever and by the time the party ends other issues will come to the fore to ensure oil production decreases faster than the underlying depletion rate. Of course when the fiat currencies blow it will make int even harder to expand the oil industry. Next your you will see a wave of cancellation and delays.
So until the printing presses stop its not worthwhile to invest in mega projects and once they do we will be to screwed up to do it. Small fields should however do well in this environment so its a great time for the little guy.
Hi m,
Thanks and if you're still reading, could you please explain some of this further?
re: "...its the most brilliant strategic move you could make as the resource wars unfold."
1) Why is it the best (except evil) strategic move? I believe you. It's just I'm wondering, or example, given the premise (Cheney's PI speech), would there be another move, less brilliant, even considered?
Or, was this it? (If one chose this general route?)
Also (from the amoral point of view) - didn't you pretty much figure the lost oil (US military use, invasion-induced Iraqui "waste") made it a net loss? So far?
So, has the invasion really "worked" so far, on it's own terms? It appears not (was my impression of what you said.)
Plus, it seems that the vulnerability of the infrastructure (to attack) only increases over time, as the anti-US sentiment and actions increase - ?
I wonder if even "harsh methods" can really outnumber and out-brutalize a perhaps endless supply of unwitting victims?
2) Agreed on the mercenaries. http://www.blackwaterbook.com/?gclid=CPWU4MWU2IsCFRmuYAodsiqnUg
The thing about these guys is - they need money (lots of it) to function. How long until they bankrupt the source?
3) And... could you please translate:
"The Democrats are playing right into the hands of GW if they are now going for plan B. If we decide stability is a failure plan B is not pretty."
First I assume if we have figured out KSA is in trouble then the government knows and probably has for a long time. This makes Iraq the only place on earth with significant oil supplies and it is strategically located. I don't think they have 100GB of additional reserves but even 10-20GB of untapped reserves is significant for our short term needs. It effectively allows the US to have control of the world. At the level of world politics I think that evil is the norm with outright massive atrocities as a regular spike in the level of evil. Everybody plays hardball I've lived in Vietnam and China and as far as I could tell these governments are just as evil as the US if not more.
The problem is not if a country is evil or not, its a matter of how well it can project its evil attentions or basically shear raw power. A few of the European governments and maybe some others like Canada seem to have truly decided to be good but they are the exception not the rule.
With this view of the world and assuming that the US government knows the status of KSA taking Iraq was not only the most brilliant move it was pretty much the only move one could make to retain power. As far as a second move goes that would have to be Russia and I think our missile defense work is designed to pressure Russia. I think that and attack on Russia could happen in the future but you would need to somehow assure that a nuclear strike could be controlled. So the second best choice is dicey at best. These are the only two places in the world that have a chance of significant increase in reserves for Russia its in western Siberia.
As far as the Iraq invasion we are there for the long haul it will be made to work if we end up having too take the route of allowing civil war so we can restart the bombing campaign and flatten the place then bring in mercenary forces to protect the oil. We of course hoped for a easy solution but we will take the oil no matter how we have to do it.
The only way Bush can lose is for us to immediately withdraw
and allow a UN force to deal with the civil war. Any other course is a win it just changes the plan. If Congress supports a surge then US troops will suppressed the rebellion on the ground and stabilize the country for the oil industry. If not then we need to do a partial withdrawal and come back with air power followed by oil backed mercenaries. The end result is the same the people of Iraq are on their own and the US will provide active air support for the oil companies and soldiers for critical installations. Baghdad will probably be abandoned. Its a complex issue but the key assertion is that US troops will be pulled back from trying to protect Iraqi civilians and redeployed to protect oil.
I think we will see the US choose to fight the resource wars by using air power extensively ground troops for key oil installations and mercenaries to get around the Geneva convention for suppression of the local population.
Thanks, m,
re: "...allow a UN force to deal with the civil war."
1 )What do you suppose would happen to the oil in this case?
2) Also, I'm wondering, still, about the part of my question having to do with the feasibility of this on its own terms. It just seems like escalating violence and escalating costs can't go on forever - at least w/out effects on the oil infrastructure - (destruction?).
I guess the way to say it - it just doesn't seem like a "sustainable" strategy. (No pun intended.)
Not only that - it seems like it *increases* the risks to such a degree, it actually *is* worse than doing nothing. Or, how do you see it? (I mean, from the "amoral and strategic" point of view.)
Also, I appreciate your point about comparing govt's. (or, even cultures, for that matter.)
Anyway, I find this interesting (though disturbing, of course), and my guess is you could write up your posts for wider distribution and the audience would be there.
I sometimes wonder if the other people in Cheney's meeting had any idea of the implications.
I would be surprised if Iraq pumps any oil if its left to the UN to clean up the mess. We have a good chance that Iran and KSA and Syria and Turkey will get involved in arming various factions and you would have to think the US would do the same.
I'd have to expect it will get far worse before it gets better. No light at the end of the tunnel here. It could take some time before the UN commits troops in the first place and their is a good chance they might not for a long time allowing the war to play itself out.
As far as the rest of your comment this situation is just the first instance of actions taken post peak destroying the very resources they were meant to preserve. The only way to secure oil supplies in the countries is to wage a vicious war similar but far more lethal than the old colonial wars.
I would guess you would have to act similar to the old soviet empire.
This is why I expect us to see the amount of oil actually ship decline much faster than depletion would indicate once oil is scarce we fast a large number of feedback loops that actually decrease the amount of oil extracted. These above ground factors will take a lot more oil off the market than depletion will. Even if Iraq magically improved itself the pent up demand internally is tremendous esp if you consider how much oil is needed just to rebuild. In general world wide its hard to get the trillions needed for investment to simply keep our current production levels. The massive drilling campaign that took place in the US when it peaked will not be repeated. We don't even have the rigs to come close to this sort of drilling.
Finally the biggest factor is that now costs are rising faster than prices we have obviously hit the price point that world demand is being destructed otherwise we would have produced and consumed more oil in the last 3 years. I was going up at a rate of 2-3%. This will slow the rate of price increases and does little to stop the increased costs because a lot of the cost is from the advanced methods needed not just the basic energy input.
I think simple EROI calculations are not enough to explain the huge issue we face as the world peaks and they are troubling enough.
As far as a wider audience goes I think the truth of whats going to happen is self evident if you look at all the knowledge we have gathered on the Oil Drum. The only part thats been neglected as a good examination of costs for the oil industry going forward and these are important because they will ensure more and more oil is left in the ground.
I think the main stream media is simply derelict in its duty to inform the people about issues. They know about peak oil if they don't wish to present it to the people that their problem not mine. The fact that our mainstream media has become a source of propaganda and entertainment is its own kettle of fish. And to be honest its the average mans problem not mine they chose to be entertained instead of informed. CNN's homepage makes me sick.
I hope when people finally understand the extent of the problem it won't just be the governments that our questioned.
Gail the Actuary,
Here is a forecast of C&C out to Dec 2011 based on bottom up analysis of over 300 existing and forecast megaprojects. This forecast also assumes that Saudi Arabia has 175 Gb total reserves and depletion rates are kept below 5.5%/year.
I'm a little worried in the short term as there is a forecast drop in supply starting in Oct 2007. Maybe Saudi Arabia will come to the rescue???
The resulting world production decline rate from aggregating all the separate megaproject forecasts is -0.8%/year. The C&C production at Dec 2011 is 70 Mb/d. If the decline rate of -0.8%/yr continues for the following 9 years, then the forecast world production of C&C at Dec 2020 is 65 Mb/d.
There are several reasons to expect Saudi Arabia (KSA) to have a relatively sharp decline rate.
First and foremost, they are probably about two-thirds depleted.
Second, as the Yibal case illustrated, when the water hits the horizontal wells, production tends to drop pretty quickly.
Third, KSA is highly dependent on one field, Ghawar.
There are two reasonable analogues, that I can think of, for KSA--Alaska and Mexico, i.e., two regions that are, or were, dependent on one field for more than half their production.
In the 10 years after Alaska peaked, their average annual net decline rate was about 5.1%, and of course Mexican crude oil production is falling rapidly. (Note that month to month declines will be sharper than average annual declines.)
The initial Saudi decline may be so sharp that they may show a rebound in production, albeit to a level below their 2005 peak.
As KSA goes into "Phase One" of its decline in net oil exports, I expect to see domestic consumption to continue to rapidly increase, as oil prices probably rise faster than exports are falling.
I agree that sa will continue declining, the next large shoe to hit imo is ad/s, coming soon. Replacement fields will produce at much lower rates.
I took a simple look at how SA c+c production is affecting world all liquids production. Of course, every barrel produced by sa adds one barrel to world production, nevertheless I found the change in the relationship over the past two years interesting. I took eia sa and world production from jan 05 thru jan 07, smoothed with 3 month moving avg (resulting in 23 points feb05 thru dec06), then subtracted 74Mb/d from world values to bring the two curves closer together. The two curves look fairly independent until around jul 07 when a surge in world production ended, but since then decline together in lockstep. As we all suspected, sa matters... imagine this trend continuing throughout the year. IMO, chris/aspo bottoms up 2010-12 PO analyses are not factoring in sa declines, and may therefore be a little rosy.
Would have posted the chart except that I could not paste XL into window...
From a completely different aspect I watch Asphalt prices. Since a lot of KSA oil is heavy and refineries in general are not tuned to handle the heavier crudes if KSA's production is heavier than normal you would expect that asphalt prices will drop as heavier crudes are used in refineries not capable of handling them even as oil prices increase. Note Ghawar is one of the main sources of lighter crudes. As the refineries upgrade this will reverse.
Guess what this is exactly whats happening.
http://www.acaf.org/asphalt_price_index.htm
http://www.acaf.org/Asphalt%20Price%20Index/Mar%2007.pdf
Hi memmel,
I like your idea of following asphalt prices, but if you look at the link below for the period January 05 till 'now' the price for oil and asphalt at their respective end points in that period seem to be about equal. This doesn't, I guess prove anything one way or the other so I will look forward to seeing results a month or so down the way as what you are saying seems to make good sense.
http://en.wikipedia.org/wiki/Image:Oil_Prices_Short_Term.png
The divergence started in January which seems to be a strong indicator that we are processing heavier oils without the refienries being properly configured thus producing more asphalt. Once they are done correctly i.e with cokers its my understanding that you get a lot lower asphalt out since they do upgrade procedures similar to whats done for the tar sands.
Others with more knowledge would comment. I read in a thread over on peakoil.com that refinery inputs are increasing but production efficiency is down. This further indicates we are refining crude oil that the refineries have not been optimized for. It seems that we have had a lot more work on the various refineries this year I assume its expansion and addition of heavy oil processing ability. It looks like this has not been completely successful.
In any case the recent divergence is striking. I'd assume as the refineries are upgraded this will close. But if the mismatch between refining ability and the oil grade is as high as it seems we may have a mini early shortage this year from this problem alone.
Considering that converting a refinery that normally process light sweet crudes to one the does heavy sour is probably very expensive we may well see a persistent shortage at least in the US until gasoline prices are high enough to justify full conversion of the refinery. And of course cheap asphalt as a side effect.
I love using the debunked articles to illustrate peak :)
http://peakoildebunked.blogspot.com/2005/10/130-heavy-crude-refining-cap...
This shows that what we probably have now is a lot of refineries processing heavy sour but with much lower yields
of gasoline and increases in asphalt.
See another happy asphalt buyer.
http://www.nwaonline.net/articles/2007/04/06/news/040707szasphaltprices.txt
This says bunker fuel is becoming more readily available
which supports this assertion.
http://www.bunkerworld.com/news/2007/04/67574
http://www.bunkerworld.com/news/2007/04/67530
So this year it looks like gasoline shortages and plenty of asphalt/bunker fuel. So it looks like plenty of heavy sour crude on the market.
The only logical explanation seems to be running heavy oils
through refineries not optimized for them. Since oil prices are still strong.
i dont follow asphalt prices except from two completely different aspects. 1)paving companies are complaining that asphalt prices are escalating because refiners are squeezing more diesel from the crude. 2) heavy crude prices in the rocky mntn region are low, very low because of the flood of canadian heavy crude, especially during the winter months. apparently there were refinery outages also.
Hi memmel.
I also recall some time ago that bunker fuel prices were discussed as a barometer for supply. Do you have any follow-up on that?
So much of Bunker World was behind a pay wall I gave up.
You can get the current prices but historical data seems unavailable.
http://www.bunkerworld.com/markets/prices/
Hi memmel;
I watched an attendent changing the fuel prices on a station sign in Salem Ore. He added 1c to 87 octane and 3c to Premium. Think you can see where I'm going. It would be interesting to see how much of the 'best fractions' come off of say Mayan or Syncrude or Haradh. Realize there is a demand elasticity thing here too for Premium but it might be an indicator.
Wouldn't the desire to compensate for the elasticity of the demand schedule lead oil companies in the other direction, reducing the price differential between 87 and 92 octane to keep them selling at the same ratio?
That's what's happened here in California, effectively, since the ten-cent premium for Premium has remained constant as the price of all grades has risen.
Nice work.
Ace wrote
“However, what is not consistent on Fig 3 is showing Ghawar’s depletion at 48% while Total Saudi Aramco is only 28%. Since Ghawar production has been a majority of Aramco’s total production, the depletion for Total Saudi Aramco should be at least 48%. If it is assumed that Aramco’s total reserves are 175Gb then the more realistic figure for reserves depletion for Total Saudi Aramco in Fig 3 should be 99/175=56%. “
i don't understand why the depletion's of one part of KSA reserves (even as it is important but still it is the part) must represent a minimum amount of depletion's of the entire KSA, i don't find this logical.
On the other hand 48 % for Ghawar depletion's is mostly from the light area (Ain Dar) and foloving your logic it would make Ghawar depleted 73% :-)
But i think this is in general a good work and it makes much more sense than pie chart sent by Aramco.
We really won't know what total number of reserves Saudi Aramco contains until there is complete transparency. Matt Simmons mentioned this in his interview with Jim Puplava. Common sense tells us whatever the figure, Saudi Oil has probably peaked.
A good reason Saudi Aramco and other OPEC countries have not be open and transparent with their Oil reserves probably is due to the PETRO-DOLLAR system. The United States only remains the leading world power because of this Petro-Dollar subsidy along with the command of the Military. This contract between the USA and Saudi Arabia took place right after Nixon removed the US Dollar from the Gold Standard. We can thank the Saudi's and other member OPEC nations for continuing our standard of living for the past three decades.
Whether Aramco contains 175 Gb, 260 Gb, or 359 Gb of oil reserves is pointless. What is more important is what is Cantarell's reserves and depletion rate. Will Cantarell deplete 15% in 2007 or might it be upwards of 20%? This has more of an effect on the Gulf Coast states refineries. If Cantarell's depletion rates rise to 20%, by 2010 they will not be able to export oil to the USA. According to Matt Simmons, that would be a Pearl Harbor event.
It will be interesting to find out what Saudi's total reserves turn out to be...but in reality, by that time...it won't matter.
steve
Nothing could be further from the truth. Saudi reserves are of paramount importance. If they have 359 Gb of reserves then they are nowhere close to peaking. They can ramp up to 20 mb/d if necessary.
Not to belittle the importance of Cantarell’s depletion rates, but the importance of that pittance of reserves pales in comparasion to the true amount of Saudi reserves. If Saudi really does have 260 to 360 Gb of reserves, then we are at least a decade away from peak. Saudi could ramp up production faster than the rest of the world declines. On the other hand, Cantarell’s decline from 2 mb/d to 1 mb/d over several years could easily be replaced by Saudi simply increasing production.
The bombshell that will rock the world will be the revelation that Saudi’s reserves, and the rest of those vast Middle East reserves, are mythological. That will be the Pearl Harbor event that shocks the world.
Ron Patterson
Ron,
The point I was trying to make, is that it is a waste of time arguing whether Aramco has 175 Gb, 260 Gb, or 359 Gb. What seems to be likely from Matt Simmons, recent SPE papers from Aramco, and many of the top minds here on TOD is that Saudi has likely peaked. Until real facts come, its useless debating.
Concerning the Cantarell field, it is more important to the United States "Gulf Coast Refineries", than it is Saudi Arabia. We import directly from Canterall to our refineries in the Gulf. Losing the 1 million barrels a day from Pemex by 2010 would be a Pearl Harbor event.
Of course the world knowing that Saudi has peaked is just as important. But, it is logistically vital to the Gulf Coast Refineries that we get that oil from Canterall. If we lose the oil from Mexico's Pemex, we would be in Hugo Chavez's mercy. We must remember, Canada is our number one supplier of oil, Mexico is second. This is due the close proximity to the United States.
Even though a country like Saudi Arabia has a great deal more Oil than Mexico, its much farther away. Regardless, the USA is in trouble in many areas. Peak Oil, is just one nail in the coffin. When one adds the Housing Bubble, the House-of-cards Stock Market, sky-rocketing consumer debt, and the sudden death of the honey bee populations (60% in the west coast & 70% in the east coast), its just a matter of time before things really get ugly. Einstein did say, if the honey bee disapeared, man would only have four years of life.
Steve
Can we extrapolate "initial reserves" for the undeveloped fields according to their expected production rates overlaid with a depletion rate of 2%?
If so, this would give the following additional reserves:
AFK 9.125 Gb
Shaybah Ext.1 4.562 Gb
Nuayyim 1.825 Gb
Khurais 20.075 Gb
Shaybah Ext.2 3.650 Gb
Al Khafji 5.475 Gb
Manifa 1,2,3 16.425 Gb
Total for these megaprojects 61.137 Gb
I hypothesised above that the implied initial reserves of fields currently under production is 175 Gb. Adding this further 61 Gb of implied reserves, we get to 236 Gb. This would imply current depletion of 47% for Total (Known) Saudi
The 236 Gb is still 123 Gb short of Aramco's 359 Gb of Proven Initial Reserves. We do not even have names for these fields, or is it all supposed to come from "reserves growth"?
I'm concerned to see so many postings here at TOD jumping on the "Saudi has peaked" bandwagon. What's going to happen a year from now if Saudi production is up? It's going to be very difficult for this site to maintain credibility.
All this evidence of a Saudi peak is really only circumstantial. None of it is individually very strong. Maybe collectively it looks like the evidence is mounting up, but really five weak arguments don't add up to one good one.
Plus it's bringing out all the survivalists with their talk of dieoff and fortresses and guns. It's a depressing read. I've known survivalists for much of my life, and IMO it is not a good path to follow, leading to bitterness and paranoia.
Of course, it's possible that the world will be a very different place a year from now, with major and growing oil shortages and all kinds of problems breaking out everywhere as people realize that this crisis is permanent. Nothing like that has ever happened in history, but it's conceivable that the paranoids will be right for the first time ever.
It's not the way to bet, though. I would encourage readers to include in their planning a contingency for life going on as usual for at least several more years.
"Plan for the worst, hope for the best, cope with the rest."
Maybe this long view we're afforded by our unique position in history will evoke gratitude and poignant awareness, rather than bitter paranoia.
For starters, let me say that there is not a chance in hell that Saudi has anything like the reserves they are supposed to have. And if we here at The Oil Drum does not have the guts to say that then who does? We are like a voice crying in the wilderness, asking the world to wake up and for God's sake take a closer look at those mythological Saudi reserves, and those mythological Middle East reserves. And you are worrying about our credibility?
For Christ sake man, the world is sleepwalking into a nightmare, and you are saying, "perhaps we should keep silent in order to protect our credibility!" Good God man, where are your priorities? What is the value of our credibility when weighed against the end of civilization as we know it?
And look at the other side. When the world does become aware of peak oil, and those mythological reserves are revealed for what they really are, people will point to The Oil Drum and say “they tried to warn us.”
On the other hand, if we keep silent because of the fear we will damage our credibility, no one will know, we will have absolutely nothing to show for our efforts.
Ron Patterson
>For Christ sake man, the world is sleepwalking into a nightmare, and you are saying, "perhaps we should keep silent in order to protect our credibility!" Good God man, where are your priorities? What is the value of our credibility when weighed against the end of civilization as we know it?
How does alerting the world today that we are past peak help civilization? We are past the point of any chance of smooth mitigation. Beside Oil deplention there are other factors that will radically alter civilization such as water depletion and massive over population that is degrading the planets carrying capacity. At best wide acknowledgement of declining resources will only send civilization into a premature panic.
What awarness will do is get at least a few people to prepare. If no one is prepared then who will be the survivirs? Probably those with the most guns who are good at orginization, putting gangs toghether.
But...a few might see the handwriting on the wall and make preperations to do their best to be among the survivors.
But I must disagree with your term "a premature panic". If you paniced today it would not be premature, it would be way late. It is way past time to panic.
Did you read the Hirsch report? He says we should be preparing today even if the peak is 20 years off. If the peak is only 10 years off it is too late to do much but do what we can. If peak is today....panic man panic like you should have done years ago.
Ron Patterson
Agreed and thanks for hanging some words on it. I always stumble over the "If its TEOTWAWKI, why bother?" argument.
>What awarness will do is get at least a few people to prepare. If no one is prepared then who will be the survivors?
That makes sense. I thought you were refering to inform the masses. Few People will bother to prepare on the premiss that:
1. There is a techno-fix and we just need to get those bad oil companies to stop selling oil and release that suppressed tech on cars that can run on oil
2. God will save the faithful. God will simply refill our depleted oil and gas field.
3. Oil is a renewable source because some guy from CERA said so! Too bad there isn't a modern day Darwin to write the book "Origin of Oil".
4. We'll start another Manhattan project to develop a clean, unlimited source of power, and we'll all live happily ever after. I find it interesting that Journalist and Politicians choose to refer an Oil migitation project after the project that created the ultimate weapon.
5. Well just all switch to Hydrogen and Ethanol! The Ultimate Ponzi scheme!
And my personal favorite:
6. Aliens from outer space will save us!
>But I must disagree with your term "a premature panic". If you paniced today it would not be premature, it would be way late. It is way past time to panic.
I would like a little more time to prepare before the rest of the world hits the panic button. I am sure others would agree.
Perhaps the story of Noah in the Bible isn't about our past, but our future. In this century, the world will experience another great flood. But instead of occuring above ground, its occuring all over the world in our oil fields (ie Watered out oil fields) yet few take notice. The same occured in the Noah Story.
Take Care
Do you, or anyone, have evidence your #2 is present or actually spreading in any religious communities, in the US or any developing countries?
Pre-mature panic...
No...pre-mature would have been in 1973. Pre-mature might have been 2000.
Unless you see some white horse coming, we cannot find, then the peak is PAST. We are lucky enough to be riding a lovely plateau at the moment, but if KSA fails to deliver...that plateau is likely over...put on your skiis.
Heck, even if the peak date is wrong, and its 2010...gee that's 3 years away. Barely enough time to get your own personal affairs in order, let alone NATIONS and a GLOBE.
So, if its alarmist, so be it. WAKE UP THE MASSES, ICEBERG AHEAD!
Hi TechGuy.
I don't know what to make of your argument. Is it better to sleep walk off of a 500 foot cliff, or fall down a 300 foot cliff with our eyes open, perhaps with a 10 second warning? Theoretically, the second option seems a little better.
You also wrote:
"At best wide acknowledgement of declining resources will only send civilization into a premature panic." I don't buy this argument for a second. The sophisticated propaganda system in the US could easily be redeployed to mobilize public support for measures like conservation, electric commuter rail, trolleys etc. This has been done for repeatedly for every war since the Spanish American War, up to, and including, the onset of the current mess in Iraq. This same propaganda system has successfully conditioned the public to be hostile to its own self interest (e.g. single payer universal health care, public transit, labor unions, progressive taxation....). If TPTB wanted to inform and mobilize the public to prepare for PO in an orderly fashion, they could certainly do so.
>Is it better to sleep walk off of a 500 foot cliff, or fall down a 300 foot cliff with our eyes open, perhaps with a 10 second warning? Theoretically, the second option seems a little better.
I am not sleep-walking, I devote most of my spare time to making preprations. No matter what you tell the population, they will not act. The majority of our population takes our access to energy and technology for granted and they believe its a lifelong entitlement. You think informing them is going to change that view?
>The sophisticated propaganda system in the US could easily be redeployed to mobilize public support for measures like conservation, electric commuter rail, trolleys etc
These changes are all but a drop in an ocean. Its impossible to feed, cloth, shelter, the 6.5 billions with oil access to fossil fuel. Our global population growth curve matches our access and exploitation of energy resources.
>This same propaganda system has successfully conditioned the public to be hostile to its own self interest (e.g. single payer universal health care, public transit, labor unions, progressive taxation....)
During those periods, energy production was on a steady growth. Up until the early 1970s we were the leading producer of oil and gas. and Before the modern age, we were the leader in wood and coal production, and our population was a small fraction of today.
>If TPTB wanted to inform and mobilize the public to prepare for PO in an orderly fashion, they could certainly do so.
TPTB are fully aware for energy depletion and are fully aware of the consequences of informing the public. They have deliberately avoided public confrontation for energy depletion, such as "in the interest of national security".
You can either continue to hang on to your belief that society will be able to adapt, or you can do as others such as myself are doing to make our own preparation rather than wait for gov't and society. Ask yourself, Do you have blind faith in our society and gov't will save itself and you and your family when the crisis begins? Are you a blind follower that our gov't can fix things in time or ever? If you do than do nothing and put your future and your life in the hands of our gov't. Do you believe gov't is an organization or is it a religion?
I don't think you quite understanding the problem. The party is already over its pretty obvious. They would have to dump 5mpd of light sweet crude on the market to reverse our situation and 5mbpd more a year after that. Thats not going to happen. Assuming the world has peaked outside of KSA we need them to produce and extra 1.5 or more mpd to make up for the world plus increases to cover internal depletion etc. They had to go to 10+ mbpd now or we are dead even if they are not in decline. No one can make up the shortfall we already have much less increase production not even KSA. Not to mention refinery and other infrastructure needed to handled the needed increase in oil flow thats not going to happen. Once they decided to take the road of high prices since they know the rest of the world has peaked it does not matter if its because of cutbacks or real depletion we are toast. They have no reason to flood the oil markets since they are assured a high price from now on out depletion or not the rest of the world will decline faster than we can switch off oil.
Feel free to show how KSA can make up for all the declining regions and manage to increase overall world oil production.
I'm interested to see people that make these claims present some valid evidence.
The oil based economy is a dead its too late to save it. Thats not the issue we know we have jumped of a skyscraper now its a question of how tall the building really was.
As someone from outside the oil industry looking in (at TOD and Peak Oil, etc.) I agree with you that stating strong conclusions built from circumstantial evidence is very difficult to accept. As someone with a science training I would rather see confidence levels ( or "error bars") discussed alongside the proposed facts.
Also, I agree that the survivalists tend to have a preset psychological framework through which everything is tainted.
However it is important to realize that everybody (or nearly everybody) appears to agree that KSA is the long pole in the tent. As such, any reasonably argued post about the KSA is worthy of a look and discussion. In any field of endeavor the "long pole" - in the case of oil that would be the KSA, (in finance/banking/economics it would be the USA (same for military, feed grains, etc), in diamonds it would be South Africa, for rainforests it would be Brazil, etc.) is the key, for when the long pole falls the whole tent must suffer some collapse.
I for one hope industry-experienced posters will continue to dig into the KSA data and discuss their interpretations.
At the moment, the evidence suggest they will have a problem this summer. But it definitely is not conclusive due to the data available.
However, while I may be on that bandwagon, I openly state that we will find out in somewhere between 41 and 71 days.
So, until then we can banter however we see the evidence going. That is the nature of public discourse.
At the end of June, if KSA (aka OPEC) has not ramped production, GASOLINE will probably getting pricey.
So, we wait and discuss. We have our sides of the fence, but I am in NO WAY adverse to being wrong about this...actually, I would love to be wrong. (and I imagine so would many others)
The homestead could use another couple years of primping.
BTW, I don't see how KSA ramping will likely change the overall peak dates already on the books, and the megaprojects database shows NO projects underway that will change this either (other than the already stated 2009 All liquids peak 2). It will just help maintain the plateau longer.
While the evidence is building that KSA decline is involuntary, it is still by no means conclusive. We are well accustomed to them being secretive, drip-feeding information and generally talking in riddles. It MAY be that keeping oil at $60-65/bbl suits them perfectly, or the talk of voluntary restrictions may be just trying to buy time while they try to rush Haradh III and the other upcoming projects into production to patch things up. I think we will have to wait until Q3 this year to find out. Even then, above ground factors may muddle the picture.
I too, hope that they still have something up their sleeve. I am not one of those who lust after an early peak and fast crash and those that do should ponder that for some (e.g. in Africa), oil at $100 and a huge amount of land being turned over to biofuel crops means not inconvenience but death.
For the last 9 months or so I have expected - and mentioned here a couple of times - that I expected the first real crunch to come in Q3 2008 and even that would not be severe, with the real trouble arriving in 2010. Maybe this was wishful thinking as my own preparations will take a couple more years to be well sorted. I now looks to me that the economies of USA and UK are creaking already (the former rather more) under the strain of oil prices consistently above $60 plus their own declining oil outputs. Unfortunately if KSA has peaked, I think we will have the first shock (as predicted by ace) late this year and in 18 months be in big trouble, ace's "red zone" time. Combine that with westexas's export land model and God knows where we will be in 5-7 years, maybe whatever is beyond the red zone (?the brown zone - see http://en.wikiquote.org/wiki/Red_Dwarf ):
Cat: Forget red - let's go all the way up to brown alert!
Kryten: There's no such thing as a brown alert sir.
Cat: You won't be saying that in a minute!
Seriously, I would suggest that if oil reaches a new nominal price record in the next 6 months, all TODers should urgently bring forward their ELP plans or whatever other means they have in mind to deal with a post-peak recession.
Haflin,
I remember you. You were here throughout as all the cards were laid on the table about the near depletion of Light Sweet Crude coming from North Ghawar. You fought tooth and nail against the conclusions, either because of your own denial or your not wanting others to believe. You disparaged the presenters without addressing the data stating:
"I agree and admit that I am ignorant and unable to interpret this evidence with the degree of scrutiny that would be necessary to come to any strong conclusions. I am a cryptographer, not a geologist. I would like to see you show it to professional petroleum geologists, ideally ones who were not previously convinced by Peak Oil arguments, and also who are willing to have their names used publicly, and get their endorsements. If most qualified professionals find your argument convincing, that would go a long way towards convincing me (although by that point my amateur endorsement would of course be entirely superfluous)."
Fractional Flow and Stuart have proved their competence by step by step analysis of the data provided over a couple weeks in explicit detail, subject on this site to peer review. No credible arguments addressing the data were presented. They have demonstrated, not just stated, the qualifications for their conclusions.
You don't like the conclusions, tough.
Opinions are like assholes, everyone has one, but opinions are not equivalent to demonstrable conclusions.
Cid,
Opinions are like assholes, everyone has one, but opinions are not equivalent to demonstrable conclusions. and what is your demonstrable conclusion about Saudi having peaked? Or is it an opinion?
Haflin, you I think are barking mad to imply that the gun toting gristle eater should be not part of this site. Plus it's bringing out all the survivalists with their talk of dieoff and fortresses and guns. It's a depressing read.. Words like these would make public relations men and women blanch and whimper like stake pierced big eyed puppydogs. Who do you think brings in the punters to this circus tent, Kabob skewering the lowly quadratic with his steely intellect or Fractional's flowing asymptotic cape of infinite closure.
NO, NO, NO, it is the dysfunctional and wild eyed that brings the gawker to stare scoff and then wonder just where reality lies.
But that is just one loony's take...or opinion. A middle of the road and loony position to take don't you think.
Here.
"Fractional Flow and Stuart have proved their competence by step by step analysis of the data provided over a couple weeks in explicit detail, subject on this site to peer review. No credible arguments addressing the data were presented. They have demonstrated, not just stated, the qualifications for their conclusions."
We witnessed the process as it unfolded. Since you are new I would suggest you check out Stuart Staniford's posts(and the comments section following each) early in March. Then you can come back and apologize.
http://www.theoildrum.com/node/2325
http://www.theoildrum.com/node/2331
http://www.theoildrum.com/node/2393
http://www.theoildrum.com/node/2437
http://www.theoildrum.com/node/2441
Oh most exulted Cid,
I most humbly apologize for having insulted your majestic imagination by even so much as hinting that freedom of speech has any relevance in this discussion. Nor did I understand that a rebuttal was not a point by point consideration of a matter in question. A thousand pardons Affendi I understand now that blind rage at a opposing position is master over reasoning. In my darkness I would have answered Haflin as in the following:
I'm concerned to see so many postings here at TOD jumping on the "Saudi has peaked" bandwagon. What's going to happen a year from now if Saudi production is up? It's going to be very difficult for this site to maintain credibility.
If worrying about the future credibility is the primary concern of this site it might as well shut it's doors and wait until reality is breaking those doors down before speaking.
All this evidence of a Saudi peak is really only circumstantial. None of it is individually very strong. Maybe collectively it looks like the evidence is mounting up, but really five weak arguments don't add up to one good one.
In the absence of any rebuttal weak arguments, as you call them, look very strong indeed.
Plus it's bringing out all the survivalists with their talk of dieoff and fortresses and guns. It's a depressing read. I've known survivalists for much of my life, and IMO it is not a good path to follow, leading to bitterness and paranoia.
(answered I think in my above post)
It's not the way to bet, though. I would encourage readers to include in their planning a contingency for life going on as usual for at least several more years.
On this I think I would agree as when there is a very good chance of there being a fire in an auditorium an orderly departure saves lives.
It was your calling FF and Stuart's analysis of the data and demonstrable conclusions, "just an opinion" that I called you on. Feel free to tear into Haflin.
Without total knowledge all is opinion, it is merely that one values some opinions over others. FF and Stuart's are very valuable opinions and, as far as I can evaluate, well based I will act in the light of their opinion until there is good reason to change. I am sorry that you seem to expect me to look on men as knowledgeable and infallible as gods. Thank you though for not calling me on my misspelling of Khebab for which I do apologize. I hope I am not tearing into Haflin, merely pointing to what in my opinion are the errors in his thinking. Straw dogs are fun so don't knock them, play with them.
"I am sorry that you seem to expect me to look on men as knowledgeable and infallible as gods."
See. You miss the whole point. Over more than 2 weeks, Stuart and FF "proofed" their position with supporting data. Belief in an opinion is not part of the equation. That is the difference between accepting the pronouncements of an "authority" and being provided with the data and the math in a manner that allows you to determine the veracity through your own faculties.
Hello, CrystalRadio!
If you've read this site for a long time (since it came online), Stuart has been making the case that we are probably about at peak. That's nearly two years now and the evidence goes back further than that. Throughout this entire time, Halfin has refused to accept the data, instead turning to every other possible explanation. When those explanations failed because the anticipated results (higher supply) never materialized, Halfin moved on to his next excuse. This is just more of the same.
Halfin is certainly entitled to believe whatever economic voodoo he wishes, but choosing to believe in that he must accept that he is going to be called on it by people who believe otherwise and who are now seeing the roughly third year of the rolling plateau that began in July 2004 continue. A key question will be production later this year, as Stuart, Robert, and others have noted. And please note that Robert Rapier never said that this might not be the peak, just that he believes it is still a few years out yet. Robert has even qualified that with comments that if KSA and OPEC are unwilling (or unable) to raise production for this summer's driving season that this would be more circumstantial (and stronger) evidence that we are indeed at peak.
Currently the case is what we would call circumstantial but there is evidence from multiple directions mounting plus we now have multiple models telling us similar things - logistics model, HL derivation of the logistics model, Ace's "bottom up" analysis, Stuart's various assessments of different market aspects, and WHT/Khebab's Hybrid Shock Model are all saying similar things. Please note also that world discoveries peaked about 40 years ago. This is important because US discoveries peaked about 35-40 years before the US peaked as well and it is yet another indicator that things are turning south.
As I said to a geologist who posted here a couple of times and then never posted again - if there is all this oil out there, why are you geologists collectively finding less and less every single year? He never replied to that. I hope he actually sat down and thought about what 40 years of decline in discoveries really means.
Anyway, Halfin won't accept any of this under any circumstances so the future he is creating for himself is one he deserves. Let's hope that all his invocations of economic voodoo are right and that none of this comes to pass because the alternative is something that I don't think even survivalists want to consider objectively.
Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett
Hi GreyZone,
I have no problem with what you say. May I say something for you to agree or disagree with?
If this site is not only to pass information between experts but also to inform the public about the issue and it's ramifications then I don't see angry responses to opposing views of much use.
If as you indicate Haflin is presenting some personal agenda that has little merit, I think to miss the opportunity of pointing out the fallacies of his position with logic and in good humour is a disappointment to any new reader. (even if repeated responses are tiresome, especially if as you say they have occured over a period of years)
I think in reading this site most newcomers will come to the realization that 'something real' is happening here as long as allowed to come at their own pace. I have not been here long enough to gather the full flavor of Haflin's posts but from his last remark, It's not the way to bet, though. I would encourage readers to include in their planning a contingency for life going on as usual for at least several more years. it would look like he is coming around to nearly Robert Rapiers timing? I hope I am reading him right in this, as nothing speaks better for a cause than the reluctant convert.
BTW I don't seem to be able to find Haflin's original post using a word search. I took this comment of his from a previous post of mine. Any idea?
Thank you for your courteous response and all the time it took to make it.
Aha!, found Halfin at last. He was hiding under a misspelling of same which in blindness I copied. All is well Halfin is found.
If people in the field and others who have studied the data arrive at the conclusion that peak is here and the swing producer has peaked and the largest field has peaked, then it behooves them to take the chance of being wrong and get their research out there. Their research can be refuted by others if it is not solid. Fear is killing us.
As for what responses peak leads to, that's a whole other debate, a most necessary one. One cannot hold off on conclusions about peak because of fear of the conclusions that will be drawn. It is progress if the debate starts taking place in earnest and in the widest context.
what credibility is that ? it doesnt seem that anyone is paying much attention.
Paper Oil Reserves
If you multiply 175 GB by a 2% depletion rate you get about 3.5 GB per year, that is about 9.5 million barrels per day, or near their peak production. If the Saudi fields are 50% depleted at 87 GB remaining and they are producing 8.5 mbod, then their depletion rates are 3.6%. If you take the figure of 65 GB remaining and producing about 3.1 GB/year you get 3.1GB/65 GB or a 4.8% depletion rate. KSA might produce another 30-40 years at much lower production rates.
Because Ghawar is such a big field and its decline believed to be faster than the overall Saudi rate and greater depletion than total developed plus undeveloped oilfields rate, some oilfields must be mothballed or not fully developed.
If you consider that 3.1GB is being taken out of all potential oil, but you had to look at higher depletion rates for the smaller developed and producing resources. The depletion rates of producing resources is higher than the depletion rates of producing plus non-producing resources. The depletion rates of Ghawar are likely quite high based on some color coded cross sections of N. Ain Dar posted earlier in TOD. Since Ghawar was rumored to have once produced in excess of 5 mbod, its loss cannot be easily compensated for. New projects will partially offset the declines, the unrelenting depletion of currently developed fields may cause the deflation of the inflated Saudi oil reserve figures. The depletion of the paper reserves of 276 billion barrels of Saudi oil will be faster than a roadrunner on a hot asphalt road in the middle of summer.
I would always use the depletion rate of remaining because it turns into an exponential decline if the depletion rate is a constant as Figure 7 shows.
It seems to me that Aramco using the depletion rate proportional to total is a bit misleading because the numbers always appear lower, and we have to do some mental gymnastics to consider the age of the field to decide how much of it has depleted.
Here's a response to this analysis made by Rockdoc at PO.com:
I just tried to get a rise out of rockdoc at PO. He seems to have some good experience and intuition in such matters, but I wonder why he doesn't hang out here. Or does he under a different handle>
Proven is less than probable, but is probable just equivalent to proven plus the effects of reserve growth? So if rockdoc wants us to compare apples and apples, is he saying we should add reserve growth?
Talk of reserve growth reminds me of the chatter about variability in climate debates, it is a canard. Reserve growth is not going to maintain, and is clearly failing, to maintain Saudi oil production. Saudi fields are similar to Yibal and will suffer the same fate. There is simply no substitute for finding large new fields. Finding more pockets in existing fields through higher resolution seismic tomography is a second order correction to the field totals.
Thank you all for your interesting posts. This is what makes me hang on here.
People
get a grip!
this is really a Doomer thread - mass rioting, anarchy
oh Lord we are doomed! drink the kool aid!
methinks you have let your imagination run away with you
... so is this the time to confiscate all guns, or issue guns to all citizens?
if I have to be anywhere in the world, I choose fortress North America (or is that life boat north america)
do a quick comparison and see how north america stacks up against anywhere else.
Indy
In town to speak at Midland College's Chaparral Center Wednesday, Pickens told the audience he is convinced the world has reached its peak oil production.
"Yes, I believe in peak oil," he told moderator Hoxie Smith, director of the college's Petroleum Professional Development Center. "(Longtime peak oil predictor) Matt Simmons and I talked today and we're on the same team. If, as (oil analyst and author) Daniel Yergin believes, there's so much more oil left, why doesn't oil production move up instead of staying flat? Global demand is 85 million barrels, or 31 billion barrels a year. The world hasn't replaced the oil it's been producing since 1985. So if there's so much oil left, I don't understand why production hasn't gone up. All the big fields are declining and all the current drilling does no more than hold off the decline. So the next step is decline. We can't hold on to 85 million barrel a day production."
In fact, he predicts that by the fourth quarter of this year, oil demand will rise to 86 or 87 million barrels a day while production will stay flat, sending prices up to the record high near $80 a barrel seen last July. He declined to predict what oil prices would be in 2008 because he doesn't know what price level will begin to destroy demand -- and he pointed out that price is the only way to reduce demand.
That's not to say, he said, oil and gas won't have a future.
"We're going to need all the oil and gas we have available, and we're going to need more," he said. "With world demand at 85 million barrels a day, what are you going to do? The Saudis say they have another million barrels, but that's good for asphalt."
I note that Mr. Pickens, Mr Iacocca, and I all share the same view....
If there is so much oil out there just waiting to gush to the surface so we can burn it, WHERE IS IT????? EXACTLY????
May I remind one and all that only Hubbert was willing to predict oil production peaks decades before, with reasonable accuracy. His method considered how oil companies function...
That they look for the easiest prospects first...
Before going for the mid level prospects......
Until....
Only the difficult prospects are left......
That's why most production curves are sinusoidal, regardless of what exact function you care to model them with...
WYI....
Most folks here see Darfur as a US attempt to control Sudan's Oil and prevent it going to China..
See Somalia as a US attempt to control the newly discovered Somali offshore, and deny local control.
Warmly,
Indy
”Saudi Arabia passed Peak Oil Production in mid 2005 at 9.6 Mb/d” says Aramco ex-employee
The anonymous Aramco ex-employee made the above statement after hearing concerned peak oilers discussing peak oil production and listening to CERA and ExxonMobil continually discrediting peak oil. He wanted to put forward the truth because countries were not sufficiently prepared for the inability of Aramco to produce more oil. Aramco had to produce their remaining oil reserves at reasonable depletion rates so that the total oil produced could be maximised. (Of course I am just making this up!)
Actual EIA data show that Aramco produced 9.6 Mb/d from Apr 2005 to Sep 2005.
Will Aramco produce less oil than 9.6 Mb/d in the future? Nobody can prove this unless Aramco makes a clarifying statement which is unlikely.
There is no direct evidence that Aramco will produce less than 9.6 Mb/d in the future. However, there is a growing accumulation of strong circumstantial evidence which points to Aramco producing less than 9.6 Mb/d in the future.
Overoptimistic Saudi Aramco
Aramco makes overoptimistic statements. Aramco’s reserves in 1980 were 168 Gb and then magically increased to 260 Gb a few years later without finding any more significant oil fields. In Saleri’s 2004 CSIS presentation, they increased their total reserves to 359 Gb!
In my story above, I used Saleri’s typical decline rate of 2% and assumed that is 2.0000%. As Aramco is overoptimistic, this typical decline rate is probably higher at 2.5%. That gives Aramco’s total reserves of existing fields in production in Jan 2004 at 3.5/.025=140 Gb. Shaybah was already producing so it is assumed that all of Shaybah’s reserves is included in that figure. Estimates for total reserves of fields not yet in production in early 2004 from AFK, Qatif/Abu Sa’fah, Manifa, Khurais, Al Khafji and Nuayyim might be 40 Gb. That gives total reserves of 180 Gb.
I was optimistic in Fig 7 in my story above while assuming a URR of 175 Gb. I assumed that the depletion rate did not exceed 5.5%. If the depletion rate is dropped to 5% Aramco’s production declines much faster further confirming that peak oil production has peaked.
"The Future of Saudi Arabian Oil Production" a US Senate Staff Report April 1979
A key statement in this report is that
http://antiqbook.com/boox/strohm/52107.shtml
Aramco had produced 36 Gb up to Dec 1978. Excluding probable reserves, adding 110 gives total prove reserves of 146 Gb. No giant fields have been discovered since that year. Assuming some additional probable reserves, say 20%, gives total reserves of 175 Gb.
Another statement from that report is on page 28 of this document
http://www.odl.state.ok.us/usinfo/terrorism/us-middle-east.pdf
Given that technology would have to extend the life of fields, instead of two decades, assume that two and half to three decades is justified. This gives a date range from 2004 to 2009 for the world to stop relying on Saudi oil.
High Probability of Saudi Arabia already passed Peak Oil Production
The 150 year production profile below shows that the total reserves relating to existing production is 148 Gb. The decline rates are assumed to be 8%/year as stated by Obaid in his Nov 2006 presentation http://www.nyenergyforum.org/app/filemgmt_data/files/OilPresEFNYC.pdf
The chart shows that Saudi Arabia’s total reserves might be 175 Gb but are probably closer to total reserves of 165 Gb as the oil production from the announced megaprojects and infill drilling is not enough to fill the 1.6 Gb/yr gap. In addition, the chart shows that there is a high probability that Saudi Arabia passed peak production in mid 2005.
Fig 1 – Saudi Arabia has passed Peak Oil – click to enlarge
World Total Liquids Production
The following chart shows that the peak total liquids production rate is forecast to be 87 Mb/d on Jul 2009. Demand is highly likely to greatly exceed supply within six months.
Fig 2 – Demand Supply Zones – click to enlarge
There is no evidence yet production can increase in the face of sa/mexico declines. Pickens eg thinks 85mb/d is the max we will ever do... indeed, we have yet to avg 85mb/d for any year. And, the ethanol component should anyway be reduced by 1/3 to account for the reduced btu content, meaning that we have yet to avg 84mbloe/d for any one year. (loe = liquid oil equivalent)
(as an aside, as we move towards heavier oils we produce less energy /b.
Sharing was easier when supply shortage was seen to be of limited duration and local, ie some regions remain amply supplied, as happened following the k/r hurricanes. If in the future supplies are limited because of a worldwide difficulty of producing what is wanted, and if this is seen as long term, many countries will be reluctant to release national stockpiles to others, possibly more so if faced with the prospect of loaning oil to those who use more of it per capita than they do.
Asians may already be getting less than they want at 60/b, explaining why regional price is higher there.