Peak Oil Media 9-6-07
Posted by Prof. Goose on October 6, 2007 - 10:00am
Oil suppliers are tightening taps says Jeff Rubin, CIBC World Markets chief economist, because they're using more and more themselves. (Oct 2, CNBC, 5 min, hat tip to Energy Bulletin, Moral Equivalent of War, and Graphoilology). If you're interested in more from Rubin, check out his slides entitled "OPEC's Call on Itself" here (pdf warning).
It all sounds like what Jeffrey Brown has been saying regarding his Export Land Model. Good on you Jeff.
T. Boone Pickens shares his outlook on oil. (Sept 19, CNBC, 5 min)
Connect to other peak oil media or comment on these below. Send the link to friends or put it in comment boxes on other sites! (Kenneth Heebner is under the fold, by he way...)
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The hilarious part in the first video is when the interviewer asks Mr Rubin why OPEC countries are using so much oil:
"Is it because they are so grossly inefficient?"
Hello! Anybody home? Are you being obtuse on purpose (don't answer, I already know).
Look at the figures for Europe (or Japan) and compare it to the US. Oh, that's not inefficiency? That's just the American way of life. Oh, I'm sorry. My bad.
And the next bit is interesting as well:
"But the bottom line here is that it's going to be very difficult to replace conventional oil imports... How high, we are basically talking about $100 oil prices."
And the joke that follows is so telling:
"Well, we can just invade Canada and that's that."
Maybe I should congratulate them for being honest about it, even if only in the disguise of humor :)
The next few year will be really interesting times to be living in.
Samu: The funny thing is, NAFTA set up the USA/Canada as one integrated oil market. The tar sands is already domestic oil for the USA- the problem is it won't be enough.
It was interesting seeing them cast around in denial - possibly a preview of the whole US. Unfortunately the next stage is anger.
I've always considered CNBC to be one of the most blatantly dishonest of the cable new channels. After being force to listen to it constantly while visiting my dad, I've come to the conclusion that it even beats fox. It is like one big infomercial for buying stocks.
The really funny thing is, that if you know anything about sales and misdirection, they are not very good.
Rubin on CNBC was kind of like Jon Stewart on crossfire. They expected the guest to stick to the script, but he didn't. So they tried to make a joke out of it, but he wouldn't play ball, and kept delivering the bad news.
They were obviously dumbfounded and speechless on several occasions.
I think Bitteroldcoot's analysis is right on. Also it looks like T. Boone Pickens stumbled for a while, maybe because it's so hard to rein himself in from telling the whole story.
That is my impression also. Boone Bickens is clearly a very astute man who knows that there is no sense in throwing pearls before swine. However, his guarded comments must have unsettled a few people's complacency, which is the most one could expect given the circumstances.
I dont know what Rubin's position is on Peak Oil. Was he also carefully understating his case ? I couldnt tell from his manner, but then I'm not an american !
BTW, a personal note regarding Mr. Pickens and the HL method. At my request, he underwrote part of the cost of the Simmons/Kunstler symposium on 11/1/05, and at the symposium I gave him some of our preliminary Hubbert Linearization (HL) work. His assistant called me the next morning at 8:00 A.M. and said that Mr. Pickens wanted to know if I could come by and brief his staff on the technique. (As I have previously described, this is the event where my daughter and son-in-law turned down the chance to meet Matt Simmons, Jim Kunstler and Boone Pickens.)
Kids ;-)
Well Jeffery it took awhile but your views are catching the big wave - I hope you benefit someway.
Hi Jeffrey,
Glad you're using your connections for the benefit of humanity. I hope you can sponsor more events like the symposium. (And perhaps next time "the kids" will jump in - if not, I bet I know some people who would be happy to fill in.)
Jeff Rubin works for CIBC World Markets.
From wikipedia: "CIBC World Markets is the investment banking division of the Canadian Imperial Bank of Commerce. It helps governments, large companies, and other large institutions obtain capital and credit and is a primary dealer in U.S. Treasury securities."
I would speculate that he was willing to be honest about Mexico and export land, because he has financial interest in oilsand development.
He came back to tar as our savior one to many times. At least he was honest that the price of tar oil will be really high.
Expectations of a downturn are on the upside while prognostications for a recession are retreating. -stuff like that.
Then again, who would have thought just a few short years ago that MSM will start allowing the Peak Oil noise to start squeaking through to the sheeple. We were warned.
CNBC is bad,, and for me Larry Kudlow's constant spinning, cheerleading and blatant lieing is stomach turning. He will spin any story into an infomercial with a goal of pulling more peoples dollars into the stock market Ponzi scheme. I can think of no greater corporate whore than Larry Kudlow.
The big oil companies have been running ads about alternative energy (I just saw a Chevron ad about geothermal seconds ago*) and ads that obliquely touch on the subject of peak oil - without, of course, ever using that term.
I wonder what the point of those ads is. There doesn't seem to be direct economic benefit to the companies for running them. Maybe the point is to give the general public a sense that of the imminent collision of excrement and air mover. Not the details of course, just enough so when the gas lines form, or the first US city loses gas pressure in February, they'll be able to stand up before a Senate committee and point to the ads and say "we've been educating the public about this for years."
Getting back on topic, it may be that CNBC takes these ads as license to discuss the underlying facts.
*Of course the geothermal ad was followed by a Ford ad where a woman swapped her Camry which gets EPA 24/33 for one week for a Fusion that gets 20/28. Go figure.
I think the point of the ads are to help them stay in business.
During the last price spike, congress started talking about taking them over and/or taxing their profits.
I also suspect they don't want to be dragged out of their cars and lynched by an angry mob when the truth starts to make it into the MSM.
Yeah --I've been noticing the new ads by Chevron recently too. I wonder how the general public (the Peak unaware) respond to these; especially the ones about oil-for-now and clean energy in the far far off future?
http://science.reddit.com/info/2x8uf/comments
if you are so inclined...
Meanwhile, the prevailing message from the "Iron Triangle" regarding energy consumption is that we should "Party On Dude."
I was listening to favorite local radio cornucopian, here in the Dallas area, who has a Saturday morning talk show focused on autos, which is 100% supported by auto related advertisers.
With a group of local auto dealers, he discussed the impact of $80 oil, and then quoted good old Daniel Yergin, to the effect that $80 oil was having a minimal impact on the economy.
They then discussed the impact of $100 oil, after he stated that it was interesting that "no one" was now talking about Peak Oil, versus the "widespread" discussions two years ago. He then went on to criticize the government for not having plans to reduce oil consumption by non-essential users, in the event that we cross the $100 oil. An interesting approach--we need emergency contingency plans to reduce oil consumption (presumably reserving it for essential uses like transportation), in the event that oil prices go over $100, but Peak Oil is not the reason for $100 oil.
Net Oil Exports and the “Iron Triangle” (July, 2007)
http://graphoilogy.blogspot.com/2007/07/net-oil-exports-and-iron-triangl...
Hi Jeffrey,
Something else that strikes me.
It's not just the "usual" cornucopians who seem not to "get it". It's also "progressive talk radio". Even, for example Thom Hartmann, despite the title of his book (which I haven't read). Still, over and over - in comments and conversations, he seems just not to understand the impossibility of "infinite growth on a finite planet", or the "back story" of oil depletion and decline.
Likewise, for anyone I've heard on "Air America": Randy Rhoads (sp.?), Ed Schultz and many others. They seem to believe the "oil company conspiracy" kind of story. Not that the oil Cos. don't "conspire" (at the very least, in a way for eg., I mean what strikes me as a very disingenuous Chevron ad appearing currently)...It's just plain weird - I mean, predictable I suppose. It's hard to even know where to begin.
Your complaint reminds me indirectly of a joke:
A brunette goes to the doctor complaining of pain all over her body.
"Just what exactly do you mean?" asks the doc.
"Look. I touch my head here. Ouch! It hurts," she begins.
"I touch my neck there. Ooch!,
"My shoulder like this, Yikes!"
And on it goes.
Well it's sort of the same with the people you complain about:
They go into the high tech store, Yahoo! There's goodies there.
They go into the supermarket, Yipee! The shelves are stocked.
They pull up to the gas pump, Bada Boom the power surge is as good as ever.
See?
The evidence is all around.
The Market just plain delivers.
Who needs to know more?
This model of the world and how it works is good enough.
Oh.
So about the punch line:
The doctor stops her and protests "Hey, you're not a brunette, you're a blonde!"
"How'd you know?"
"Your finger is broken."
Hi step,
Well, by now perhaps you might now I'm a little sensitive* to blonde/brunette jokes. Especially ones where the "doc" is presumed to be...(drum roll) - male?
Point well taken, otherwise.
*Insert "History of the recognition and institution of human rights and/or legal rights of women and children" here (http://en.wikipedia.org/wiki/Women's_rights)
To put it rather starkly, that is because the ‘progressives’ (typically US Democrats), ‘leftists’, which includes many ‘greens’, support the status quo, with the exception, perhaps, of war-mongering. They merely provide a voting alternative (team red - team blue in the US), self expression for a minority candidate in the first round (France), etc. Neo-liberals are just as dangerous as neo-conservatives... And, because they are ‘leftists’ they can have more varied stances - anti-corp, anti-incumbent-gov, anti-capitalist, anti-US (outside it), pro green foolery, pro pie in the sky (abiotic oil for ex.) etc. etc. which provides them with plenty of space to distribute *blame* about while ignoring facts, which also provides hopes for the future, techno fixes, etc. A conservative mind-set is more solidly anchored politically, socially and even ‘materially’ (given the fact that ‘reality’ is a construction in any case) - far narrower and more consistent.
How can ‘facts’ exist, when ‘reality’ is a construction?
Unless you mean ‘construction’ in the sense of God's being a geometer: a ‘construction’ by mortals implies mutability. If it is a ‘social construction’ (the usual phrase), then we need only decide that there is more oil, and the Peak Oil crisis will be solved! (If otherwise constructed, we should still look into the feasibilty of influencing the construction, which would still likely be easier than solving the problem directly.)
Hi djd,
re: "If otherwise constructed, we should still look into the feasibility of influencing the construction, which would still likely be easier than solving the problem directly."
Touche'! :) Though, I think I (possibly) understand the point Noizette is trying to make - I think she means the way humans perceive and also act is subject to many factors, the interactions and basis of which are not all that clear (despite much study), and thus our apparently shared reality is perhaps not as immutable as people might believe.
In any case, thinking it over, perhaps it depends on what "construct" we're talking about. Certainly the economic system and the "warring tendency" might benefit from some rearranging of their respective constructs.
(Also, it seems some people have decided to try exactly as you suggest - put on a cheerful face and conjure up abiotic oil.)
Hi Jeffrey,
I was wondering when you where going to publish the analysis that yourself and khebab have been working on?
(The video said KSA consumption was up 9% this year -party on ME dudes!)
Regards, Nick.
Shortly after the ASPO-USA conference.
Clean Energy?? Excuse me but isn't natural gas a fossil fuel? I thought fossil fuels contributed to global warming. So how is it 'clean' to say nothing of sustainable? Natural gas as a 'clean energy' is an oxymoron.
Natural gas is a "cleaner energy". Like low tar and nicotine.
RobertInTucson
I haven't escaped from reality. I have a daypass.
Hello TODers,
I was in Vienna Austria this past week, and I happened to sample some of the fine wines they produce in that lovely country. I didn't know much about Austrian wines, since I don't recall ever having seen very many of them where I live in the States or indeed even in Europe. I asked the bartender why this was so, and he said, "We drink it all. We don't have any left to export." And I thought, "Hey, here's Jeffrey's Export Land model in action."
I made a joke, something like "Wait until the Saudis decide that they need all of their oil." Which drew a laugh, but then the bartender got serious. He said that many Middle Eastern oil types came into his bar this past summer (OPEC has a presence here), and they kept talking about how they were diversifying their economies because the oil will be "finished" within the next 20-30 years.
The signs are all there for those who care to look.
Cheers
I ran across a PR release from Saudi Arabia a couple of weeks ago that was remarkable. They talked about their vast oil reserves, but not one word about oil exports. They went on and on and on about the wonderful investment opportunities in Saudi Arabia. To me, the implication was that if you wanted access to energy, you should locate your business operations in Saudi Arabia.
I came across an article written by Dr. H. Bateman. The title of the article is “An Integral Equation Occurring In a Mathematical Theory of Retail Trade”. I’m a little rickety on my control system theory but I’m going to have run at it.
From Dr. Bateman’s article,
“ A tradesman, who buys and sells various articles will be supposed to have worked up his business to such an extent that he can be sure of selling his goods at a constant rate so that a new supply of any article will be completely exhausted at the end of an interval of time T after the date of purchase. Our problem is to find the law according to which goods must be purchased in order that the total value of the stock may remain constant.
To simplify matters the process of buying and selling will be treated as continuous instead of discontinuous. This is approximately true if business is brisk all the time and if the working hours and days are pieced together so that ‘business time can be treated as a continuous variable.
We shall suppose that the initial value of the stock is represented by unity, and that stock of value phi(tau) d(tau) , which is purchased in the interval of time tau to tau + d(tau) , is reduced in value by sales in such a way that the value of the remaining portion at time t is f(t - tau) phi(tau) d(tau) , where f(t) is a function expressing the rate of sale. According to our simplifying hypothesis we have
f(t) = 1 – t / T t < T
f(t) = 0 t > T
The value at time t of the residual portion of the original stock is clearly f(t), and so the equation for j(t) is
1 = f(t) + integral[f(t - tau) phi(tau) d(tau)] .”
By using convolution integrals and Laplace transformations
integral[f(t - tau) phi(tau) d(tau)] = integral[ f(t) phi(t - tau) d(tau) = 1 - f(t) = g(t)
F(s) = 1 / s – 1 / (T x s x s)
G(s) = 1 / (T × s x s)
Since
G(s) = F(s) × phi(s)
G(s) / F(s) = phi(s) = 1 / (T× s – 1)
phi(t) = 1 / T × e ^t / T
So if the rate of sale is linear, the goods must be purchased at an exponential rate.
If the rate of sale is assumed to be exponential, then
f(t) = e^-at
F(s) = 1 / (s + a)
g(t) = 1 – e^-at
G(s) = a / [s(s + a)]
G(s) / F(s) = phi(s) = a / s
phi(t) = a
So if the rate of sale is assumed to be exponential, then the goods must be purchased at a constant rate.
In view of peak oil, the world can not continue to consume oil at its present consumption because oil is not available to be purchased at a constant rate.
interesting...where is that published? I'd like to have a read...thanks for bringing that to us.
One of the interesting things about a steady exponential decline rate in production is that the volume of the year over year decline in production actually declines with time. For example, -5/year at 2 mbpd is a decline of 98,000 bpd, but a -5%/year decline at 1 mbpd is 49,000 bpd.
In contrast, the volume of a net export decline tends to stay stay more or less constant, at least for the ELM, or how to go from one mbpd in net exports to zero net exports in nine easy steps:
(1) -125,000 bpd
(2) -115,000
(3) -120,000
(4) -110,000
(5) -110,000
(6) -110.000
(7) -100,000
(8) -100,000
(9) -110,000
Because the volume of the net export decline is relatively constant, the net export decline rate accelerates with time. When you look at these export models, a -2% to -5% production decline rate is practically benign in comparison.
another way to put it: it's function thinking versus first (and second) derivative thinking...
queue Albert Bartlett video.
What's troubling is that the current data support the model.
Based on the BP data base, the 2005 to 2006 net export decline rate for the top five was -2.5%/year. I don't think that there is any doubt that the net export decline rate will accelerate from 2006 to 2007. Our middle case model for the top five for 2007 shows a -13%/year decline rate.
Goose
Are my differentiations of the normal density correct or not?
Any thoughts about breaking public key crypto without factoring?
Thanks in advance.
bill
Nooooo kiding.
Bejesus.
Did I return to primary school or what?
If the export decline is constant, why do you keep referring to it as an exponential of a negative exponential? That's too stupid for you. I don't think you're that dumb. Rather, you are too obsessed with exponentials. Away with it. Go back at simple lines:
Use y = m*x + b instead.
Well, for starters the elementary math of the ELM seems to have escaped most of the world, and until fairly recently, most of the Peak Oil community. Virtually everyone has considered the worst case to be a gradual -2% or so per year decline in world oil production.
To give you an idea of how overlooked this has been, a group of high level government scientists, who are peak oil aware, told me that they were dumbfounded when they considered the implications of the ELM. They said you could have heard a pin drop as they all looked at each other.
Second, the net export decline volume is not absolutely constant, but it is relatively constant, at least for the ELM, leading to an increase in the net export decline rate--from -13%/year for year one of the decline to -65%/year for year eight.
I do have a question. A reservoir showing an exponential decline rate declines at a constant rate per year. A reservoir showing a hyperbolic decline rate shows a slowly falling decline rate, resulting in a flattening decline curve.
An article on exponential versus hyperbolic:
http://findarticles.com/p/articles/mi_m3159/is_4_227/ai_n16372448
So, what do you call something showing an accelerating decline rate? I've been calling it an accelerating exponential decline. Any other ideas?
This is interesting. I did a Google Search for Accelerating Exponential Decline Rates, and the top two listings were two of my articles on net export declines.
This whole thing is really, really weird. As someone asked a few months ago, if an impending net export decline/crash is such a big deal, how come so few people are talking about it? It's a very good question.
Thing is, you're making double negatives. What I was talking about is this, I thought I had been clear: if you make a negative exponential out of a positive exponential, and the value you square is similar, you'll get, (!awesome!) a linear equation! That's why you keep having a constant decline. You are destroying the effect of your exponential by multiplying it to a negative one. Risk both them off and you'll get a constant.
I wonder if that is why you can't find it at google. It's because it is worthless. It's like a double negative. People rather use simple positive in those cases.
The ELM assumes an exponential, and therefore constant, decline in production of -5%/year and an exponential increase in consumption of +2.5%/year year.
So, what we are looking at is the difference between production, showing an exponential decline, and consumption, showing an exponential increase. What are we squaring?
As noted above, the net export decline is not an absolutely constant decline, in terms of volume (close, but not absolute), and in terms of year over year change, the decline rate accelerates with time.
In regard to my question, I guess I will simply refer to it as an accelerating decline, since exponential, by definition, is a constant rate function.
The underlying mechanism of declining exports is declining net energy, in my opinion, NOT increased use by the non-energy sector of exporting countries. This is a very important distinction. If declines in net energy are the origin of less global oil exports, economic growth ends - if exports decline due to some sort of wealth/growth effect in the exporting nations, then economic growth ends in non-exporting countries only.
Hello Westexas...I enjoy reviewing your work and ongoing analysis as we move thru time. You have mentioned frequently that the "ELM, UK, and Indonensian case histories all show decline rates..." (you know the rest)
Have you ever taken your position and applied a contrarian analysis to it. How would it stand up if you attacked your model? Are there other case histories or analogues that mirror this affect? Is there evidence of a plethora of new fields coming on line over the period of the next 6-9 months that could cause a plateau or potential reverse in the export decline. Has that been analyzed as it applies to the current world export decline trend.
I have to admit the data you have presented is both sobering and empiricaly credible. And I mean no disrespect, but there is a certain repetition to some of your comments which is not in itself meaningful, but it causes me to pause and explore if every angle (within reason) has been scrutinized. I say this only because I presume a great many folks are weighing the concequences of this trend and its impact on a great many of things (large and small...personal and business, etc).
Thanks in advance for your consideration
''Is there evidence of a plethora of new fields coming on line over the period of the next 6-9 months that could cause a plateau or potential reverse in the export decline''
Simple answer: NO
There are no new supergiant* fields currently starting up in the next 6-9 years, let alone months.
In order to maintain production at anything like current rates, then we would have to find another geological basin similar in size to Iraq-Kuwait-KSA, or several North Seas.
* Supergiants are not Buzzard sized. They are Cantarell sized.
And hats off to Jeffrey Brown for the ELM
Looks like the penny is dropping.
I wonder what the pretty girl in the you-tube clip drives to work...
Thank you mudlogger...I am acquainted with a gentleman who advises hedge funds and recently read his report on near term oil trends. In some communications back and forth, he expressed a similar sentiment and offered some details behind his rationale. I have benefited from the discussions here at "The Oil Drum" and expect to continue to be enlightened. Here is an exerpt (not his proprietary report)from some of our recent communications. Just trying to "pay it forward". I have passed on his comments, with his permission in the past. Regret that I cannot name the source.
"With regards to your concerns about declining imports, there should be one brief uptick towards the end of the year when Khuhsaniyah (sp?) in Saudi Arabia comes on line. I have heard estimates from 300,000 barrels to 900,000 barrels per day of production out of this field. Other than that, with regards to larger projects, there is not much coming on line -- except for some fields in Nigeria -- now that Kashagan in the Kazakh Caspian has been pushed back again by a couple of years. Khurais (also in KSA) is suppose to come on line during 2009. It is expected to add 1.2 million per day of excess capacity, but the field was mothballed in the early 80's because it was too dificult to produce. Its peak production back then was 152,000 barrels per day one year back in the early 80's. When you factor in the declines from the Burgan, Canterell, and most likely Ghawar fields -- the world's 3 largest -- it would appear that world oil supply has peaked.
"So that begs the question, what's next? I think that as export capacity decreases -- because of the overall decline in supply and because of the increased consumption in oil exporting countries -- prices will continue to rise until demand is killed. This will obvioulsy affect the third world countries first. Once the 'secret' gets out, look for a lot of turmoil. Right now I think there are some interesting things going on. For example, this recent refinery addition in Texas with the Saudis will probably be the first heavy, sour crude oil refinery in the United States. Moreover, this refinery will probably be able to refine vanadium -- a characteristic of the oil from the Manifa field in Saudi Arabia. This field is one of the ones that counts toward that 'excess capacity' number that the KSA likes to talk about; however there is hardly a refinery in the world that can process this vanadium. In this way, the United States will keep a 'foothold' with KSA when things get ugly. I agree that the oil sands in Canada are going to become very important once the 'secret' gets out. Large exporters will start to horde the oil for its own citizens -- and probably increase their own refining capacity as a result -- so Canada, alternative energy, and EOR techiniques will have to play a larger role. I guess it is with morbid curiousity that I will see how this plays out. The world can not support 6.7 billion people in an age of declining oil supplies. Maybe cold fusion works..:-)"
Nate: IMO, the declining net energy might be understated. As an example, Iraq's internal consumption increased 25% from 2003 to 2006 as the country slid down the tubes. I don't know who is using all the oil (maybe the US military) but it doesn't appear that Iraqi standard of living is increasing as Iraqi oil consumption steadily increases.
very good point
i am looking into some numbers and will try and quantify this (again)...;)
Hi Nate,
re: from your comment above,
"If declines in net energy are the origin of less global oil exports, economic growth ends - if exports decline due to some sort of wealth/growth effect in the exporting nations, then economic growth ends in non-exporting countries only."
Well, actually, (question): for a while we would see a slowing/decline in rate of growth, anyway. So exporters could still be seeing growth, though at a slower rate; i.e., their efforts to keep growth going - ? (Is that not the assumption Jeffrey is working with?)
In any case, I'd be interested in your numbers. The way that debt enters into the entire picture has got to be really skewing it, in a sense. Eg., can the Iraq invasion possibly be (currently) funded (in an on-going sense), with "real" money?
As you noted, importing countries lose out in both cases.
westexas:
I call it deep doo-doo, Its definitely going to truly shock the OECD, because if anything, you and Khebab have been entirely too conservative. A problem with the ELM model is that it makes no provision for geopolitical considerations except hoarding which is thought to be linear. The anti-immigrant crowd and the construction recession/depression are causing incredible pain in the Republic of Mexico. All the mountain villages filled an overpopulation of women separated from their husbands and sons who have been sending $50-$200/per wekk home. Mexico provides about 15% of the US oil imports, too.
With the crash in production at Cantarelle and the 3 pipeline bombings so far, the next bombing may give your ELM model a 15% first year decrease instead of a measly 2% so the actual production might be hoarded by all the producers.
So, what do you call something showing an accelerating decline rate? I've been calling it an accelerating exponential decline.
AFAIK (and I'm at least theoretically qualified to pontificate), there isn't a term for it, so feel free to invent one. I would use something like "super-exponential" - it saves characters and syllables, and it emphasises the fact that you're outside the traditional exponential-hyperbolic-harmonic spectrum.
Exponential decline is normally the "fastest" allowed by the governing equations of reservoir and well fluid flow. Hyperbolic decline is actually a continuum of possible decline curves, with exponential at one end and something called harmonic decline at t'other. Harmonic decline has the embarrassing mathematical property of giving infinite cumulative production at infinite time, and it's never fully physically realized.
There's an exceptional case relating to declining pressure and decreasing gas-liquid ratio, normally in waterfloods, where wells decline smoothly and then abruptly shut down because low flowrates are not stably accessible. Like a lot of things in physics, that gets swept under the carpet because it isn't mathematically tractable. Predicting when a well will cease to flow, with sufficient accuracy to be useful in business planning, is more or less impossible. Therefore, a competent operator will install artificial lift before that point, which will put the well back onto the hyperbolic decline spectrum.
It's interesting to look at the historical volatility of the decline measure as a function of time and averaging period, just so you don't get too excited by short-term blips. Khebab did something like that over a year ago (those big Jackson Pollock panels). I tried the same thing on the field I was working on (less than a hundred wells) and was amazed by just how volatile the decline measure was on a timescale of several months. Black-Scholes, anyone?
See also here http://www.theoildrum.com/node/2991#comment-240037
>>So, what do you call something showing an accelerating decline rate? I've been calling it an accelerating exponential decline. Any other ideas?<<
There's already a term we use here in Maine.
Called the "pucker factor."
The reference is anatomical. I won't go into it here.
RE: Pickens and "Clean Energy" and natural gas as a transportation fuel.
Doesn't Pickens know that North American NG is going to peak and nosedive real fast?
Is he counting on LNG as a source for NG as a cleaner-than-gasoline transportation fuel?
Does Pickens see the ELM model for petroleum -- and so more export of NG to help make up for the loss of petroleum supply to most of the world who must import petroleum or NG?
My guess is that Pickens sees no alternative to importing NG, and sees this as a cleaner, greener fuel but also as a greener investment as well.
Thoughts?
Yes, I agree wholeheartedly with your guess. It would seem to me that this is his way of turning attention to NG so that he can start to get some action towards dropping resistance to LNG terminals.
He first publicly got on the 85 million bpd crude soapbox back in May 2005. Nailed it, eh? He did not pull punches, he stated quite clearly, Maximum production was here. On CNBC.
One year later they had him back. This time for an entire hour as a guest host before the open. He had recently been named as the most successful trader of the year by Forbes Magazine. (Uhm, yea you guessed it, trading oil, hehe.)
He stated again, several times, the 85 mil bpd figure.
That should have been the one big takeaway from the hour. Never mentioned again the rest of the day, although other Pickens snippets were mentioned now and then throughout the day.
He also mentioned that he thought ethanol and other bio-fuels had a part to play. But he did stress that they would be only bit parts. Not solutions.
It would seem as if he really believes NG to be the next transportation fuel opportunity. Operant word in that phrase- opportunity.
I think he has either overlooked (doubtful, lol) or is playing down the role that rising costs due to rising crude will have on liquefying and transporting NG in volume. We are already seeing that have an effect.
'Cleaner'? Pulease. I doubt that he cares, but it makes great copy.
Hi Relayer,
re: "It would seem as if he really believes NG to be the next transportation fuel opportunity. Operant word in that phrase- opportunity."
Exactly. Obvious Q: For whom?
And who is going to think about what will work for everybody else?
Beggar,
I believe you are right about North American gas peaking. It looks like 2001 will be the peak production year (conventional + nonconventional). But the decline rate so far has actually been pretty shallow, about 5% over the period from 2001 to 2005.
Globally, oil is becoming scarce more quickly than natural gas. In North America, the decline of natural gas production has been mitigated so far by demand destruction in the industrial sector and a series of warm winters. So the price of oil has risen much faster than the price of natural gas. Here's the latest Nymex price quotes:
Natural Gas = $7.03/mmBTU
Multiply x6 to convert mmBTU to a barrel of oil equivalent
Natural Gas = $42.18/barrel oil equivalent
Oil = $81.22/barrel
Gasoline = $2.04/gallon = $86.07/barrel
Hard to believe, but natural gas is currently less than half the cost of gasoline! And this is before taxes, which are higher on gasoline than natural gas. At these prices, everyone should convert their cars to run on natural gas. Sure makes more sense than converting your vehicle to run on E85 so you can pay more!
Pickens is just making a shrewd business play. Probably won't last long, but he may have a nice 3-5 year run of big profits from the price imbalance between oil and natural gas.
Hi Solaris,
Thanks for the nice summary.
Does the same infrastructure work for methane? My guess is yes and we will be getting more of that coming on line as well. Ahead of the curve?
LNG infrastructure? Highly likely: natural gas is mostly methane, at least in the processed form it's usually sold in, although it does contain nonnegligable amounts of higher hydrocarbons (mainly ethane and propane) and usually an odorant.
However, if you are talking about intracontinental transport, pipelines are usually preferred. Where would a significant amount of new methane come from - CTG, biomass, … ?
I'm sure NG is due for some major export withholding.
Big gas export contracts seem to be needed to justify the initial cost of processing plant or deepwater wells. However once those fields have produced for a few years 'resource nationalism' could take over and legislators will ensure local demand gets priority. In Australia's case I think a lot of gas will be shipped as LNG (rather than pipeline) from the northwest to the southeast of the country. One new form of demand may be a major switch by truck fleet operators from diesel to CNG from expanded LNG, example; http://www.greencarcongress.com/2007/04/boral_and_iveco.html Trucks won't have to refuel on the highway, just at the depot.
The message then to export customers will be thanks for the startup money but now we need the gas at home.
When I copied the article, I forgot to write down the citation. However, I finally found it "Messenger of Mathematics (2) Vol 49 (1920) pp 134 - 137. The article is so terse that you must read between the lines. It appears he is trying to find a fuction phi(t) if the tradesman is selling many articles such as hats, shoes, ties, etc. So the equation at the bottom of page 136 is pieced together for many articles for sale.
As a "non-american" it's interesting to observe from the outside. Those video clips of CNBC and Boones Pickens indicated to me that Americans as a collective generality are only now starting to really understand thier plight. The lady presenter in the first clip gave me the impression of,"Hey I'm an American and I wanna know where MY oil is?" The references to "invading Canada", was it a joke or was it really that far from the truth. Look at Iraq.
Our time has finally come to an end and the rest of the world can see it. We in the Western World have relied on "foreign oil" thinking it would never end. This could spell the end of Western Economic Dominance. We reacted to the "oil scare" far too slowly. The USA being the biggest consumer, now has the farthest to fall I'm afraid. T Boone Pickens will make another fortune while the majority of us will freeze, overheat, walk or cycle maybe even starve.
I live in Australia, Western Australia, which could export LNG to you - if the film stars in Hollywood will let us a build a terminal off thier bit of "unspoilt natural coastline". Is that ironic or just hypocritical? Or is it just typical,,,,,,,,,,
We all know the Peak Oil story so we need to move on to a logical solution. Its called RATIONING.
The best scheme I have read about is TRADABLE ENERGY QUOTAS. You can easily find it. It is probably the only approach that might let us down gently (well, more gently than any other approach I read about, like die-off or dreamtime technology just around the corner).
We should be talking up rationing so the politicians will think of it first. :)
Cheers
Michael Dwyer
Beyond Oil South Australia