Stuart,

It never ceases to amaze me the commitment that you guys show to rooting out titbits of info and pulling it all together into useful arguments and articles!

So isn't the increase in output seen exactly what an economist would argue would happen given the increased cost of the extracted product?

I think we may see the same happening with some other commodities that have seen huge rises -such as Uranium. There's loads of Uranium in the ground the economically extractable amount goes up exponentially with the underlying asset price.

Regards, Nick.

http://science.reddit.com/info/62m6z/comments/

thanks for your support.

Wow, amazing how much data coming from committed volunteers.

Stuart,

As I posted in replying to an earlier post by Ace, the 2008 looks to be a significant outlier. When I looked at the wiki data for 2006, 07, 09, 10, 11 etc. the values seemed to vary about the 4mbpd level.

At 7mbpd, 2008 looks massively out of the ordinary. When you look at the data this is also composed of lots and lots of small and medium sized fields (nothing >400kbpd). How confident can we be that all of these are really due to come onstream during 2008? And all under the oil rather than gas heading?

Also, this year its claimed that 4.5Mbpd came onstream. Yet we've seen essentially flat total production numbers. If all of this was real then it implies that the natural decline of all of the old fields is 5.2% - a high decline number.

Interesting.

I see that Mexico announced that it would export zero oil to the United States by 2012.

I guess all this new oil will make up for that decline and the decline of other fields and the increased domestic use by oil producers.

Of course it will.

My guess is that demand destruction through a collapse of the world's economy will drive down use. Prices may be another thing as we spiral towards hyper-inflation. I see that the markets are anticipating yet another helicopter drop. Half a percent, the rumor goes.

Here, the most important thing is that certain peak oil timing factions be proved right or wrong.

Reminds me of Enrico Fermi, one of the most brilliant of the atomic scientists, who offered to take bets on whether or not the bomb would ignite the atmosphere.

How much lag is expected between first production and peak production? It seems like it must be at least a couple of years.

When we look at total world C+C oil production, there were fairly large increases in 2003, 2004, and 2005, followed by small declines in 2006 and 2007 YTD. These increases in thousand barrels per day were as follows:

2003___2,280
2004___3,064
2005___1,295
2006____(263)
2007____(451)

The years with high first production are the ones with low total increases, so it clearly doesn't make sense to just map the production increase to the year the production came on line. Any ideas what the new data says?

Stuart - I am new to the megaproject stuff but it appears to me that 'West Qurna Phase II' is booked to add 650,000 barrels to new production in 2007 and as far as I can tell this project is not even off the ground yet. Conoco Phillips have it booked as a 2012+ project and that may even be out the window if partners Lukoil have lost the contract.
http://www.conocophillips.com/NR/rdonlyres/529DEF29-3A4B-4E35-9CAA-31A97...

recent news items suggest development is a long way off ("Analysts have long said the West Qurna deal could bring benefits only in the distant future."
http://www.reuters.com/article/companyNewsAndPR/idUSCOL55148220071105?pa...

If this is correct it takes a big bite out of 2007 added capacity?

Good effort.Lots of leg-work.It's hard to measure from your charts(picking out same color),but it appears that some projects have different production amounts depending on the source you used.It would be usefull to have 3 bar charts of the prod from the same # of projects from the 3 dif sources.

Is the vertical axis of the first chart mislabled? It says kb/d with single digit values. Should this be labeled "thousands"? Anyway, the vexing problem of how to balance all the new megaproject production with typical existing field decline patterns, the discovery pattern of finding big first, small later and all the factor interplay that happens in any large body of land is the main thing that Hubbert's math figures out for us. But it is Hubbert's model that gets ignored by most everyone portraying the new finds and projects and their implications for energy policy.

Stuart,

In the 2nd list of companies I can see quite a few with new projects developing. Mexicans, Norwegians. Maybe Russians? Iranians, and more.

Collectively with the smaller companies, some of which I never heard, the 2nd list will add significantly to the total.

Can this off-set declining old fields? I doubt it. And if it does, for how long? And if longer, will technology save us? I doubt it. Human behavior is not so easily altered. The window of opportunity is getting smaller by the day.

We need a crash plan NOW. Local agriculture, birth control, a 250% gas tax*, proper basic education, literacy & craftsmanship, reforestation. To start with.

No doubt this will not happen.

*Of my gas,66% vanishes straight in to the coffins of The Hague; this equals a 200% gas tax.

Incredibly good work. Before we start to think Jackson, Yergin et al are correct a number of points..

Depletion should be at least 4mbpd through to 2014.. Probably more at 4.5% of cumulative net.

Oil sands should be separated out as decline rates not relevant.

Chicontepec must be phased in.

70kbpd from phase 2 at Long Lake Oil sands 2011
http://www.longlake.ca/PDF/LLPhase2%20Brochure%20LR%209_web%20.pdf

Shah Deniz condensate has been revised down to 14kbpd http://abc.az/cgi-bin/wnews_one.cgi?nid=19111&lang=eng

Iraq production very tentative especially Taq Taq and Subba

Probably lots of other revisions due..

I think on the big picture looking back at the oil production curve , peak and all. We would see a mechanism like this, where the backside of the peak will be rather flat and with small net declines for im not sure how many years, 5 maybe? This would be due to oil producers starting to realize the incentive of higher prices and their small proximity to the peak. So maybe a lag to where we have a increase new production for a while to a point where the declines will start to become much steeper as new projects are more and more heavily outweighed by declines? What do you guys think?

Also I was thinking along lines with these mega projects of another mechanism related to the overall peak. It follows as price rises you have more and more incentive to find oil. It follows that that oil will be a lot harder to get to, therefore larger projects are required to get to that deep, or very low quality oil. The larger the project the more time required to build it and put it online. I wonder if the size of these large projects would prohibit them from catching up as fast as they'd need too. I suppose I'm talking about the same kind of thing with a shallow cliff and a steep plunge. How long that cliff is may affect how long we have to bring up other energy sources online, with cliff being defined by a relatively sudden increase in net production decline. I wonder when factors will come into play such as demand destruction, recessions and renewable/unconventional resources will play a role. Seems to me like the quicksand effect described by this, http://www.peakoilassociates.com/POAnalysis.html, as far as projects are concerned because the cost of production for the project itself will rise as production declines increasing the cost of energy. Oil producers will not have as much economic reason as one would think with high oil prices, due to the sheer cost of building these massive projects. I would like to look into this. What do you guys think though, what are the cost of these mega projects plotted against their expected return ect.

Sorry that was a bit scattered but thats how I think

Other posters here have previously made the assertion that accelerating decline is not what we should expect, basing that on the behavior of the observed US lower 48. However, this assumption appears to be discounting the potential change in shape of extraction curves due to EOR techniques, the high drive to extract as fast as possible from costly reservoirs (especially undersea reservoirs), the possible changing percentage of offshore versus onshore reservoirs, and the impact of higher profits on drilling activity generally.

Let's do a brief mental exercise and see if accelerating decline rates look reasonable or not.

First, we know from the data that global production has remained essentially flat from July 2004 to the present. This is the plateau that Stuart, Khebab, Ace, and others have so often documented. Second, we know that during this time frame the price of oil has more than doubled, from the mid $30 per barrel range to the current high $80 range (with spikes near and even over $100 per barrel for selected types of oil). Third, we know from both the Wiki project and Petroleum Review that the volume of new oil coming online from 2004 through 2008 has been increasing. Petroleum Review has a low of 1mbpd of new oil in 2004 rising to about 4.5 mbpd of new oil in 2007. The Wiki project has a low of 2.5 mbpd in 2003 rising to nearly 5 mbpd in 2007 then exploding to over 7mbpd in by the beginning of 2008 (that is over the course of 2007 which is now nearly over).

Clearly large price increases have not (yet) broken the plateau. Thus any new project coming online must be seen as only offsetting existing declines minus any deliberate reductions by nations like KSA. In order for the entire 4.5mbpd of new production last year to not be attributed to declines someone must demonstrate that existing producers chose to withhold over 4.5 mpbd of existing production in a market that is paying better than any oil market in 25 years. The only major producer whom we can argue may have voluntarily reduced production is KSA and by about 1mbpd. This therefore means that the remaining 3.5 mbpd are highly likely to have been used to offset declines in existing fields.

However, let's step back to 2004. In that year the lower bound of the argument (Petroleum Review number) suggests that 1mbpd of new capacity arrived online. There is no evidence that any major producer voluntarily withheld production in 2004 during a rising oil market. Thus the entire 1mpbd of new production was used to offset declines.

A popular figure is 3-4mbpd annually of declines that must be offset in existing fields. Retired officials from Saudi Aramco have used this number as well as other petroleum professionals ranging from the CEO of Schlumberger to Matthew Simmons. It's a widely accepted number. This would strongly suggest then that in 2004, about 2-3 mbpd of declines were offset by reworking existing wells using EOR techniques.

Fast forward back to 2007. If we assume that the 2-3 mbpd of decline offsets from existing wells is the same as in 2004, then total declines in 2007 must have been closer to 6-7 mbpd. We can derive this number from looking at the 4.5 mbpd of new production, the plateau in total production, subtracting out the 1mbpd of KSA reductions (generously assuming that ALL of it is voluntary - the situation is worse if not), and then adding in the 2-3 mbpd of reworked well production used to offset existing declines. For this not to be true we would have to assume that oil companies worldwide were voluntarily not applying EOR techniques to stop declines in existing fields. This is a completely unreasonable assumption.

This means that from 2004 to 2007 we have seen total declines go from roughly 3-4mbpd to 6-7mbpd. Thus it does appear that decline is accelerating and that opens up the question of why?

The area that I would expect to cause the most change in production profiles is the percentage of total global oil derived from offshore fields. The economics of offshore fields drive the producer of that field to extract as rapidly as possible, since the field is a constant (and high) fixed cost that appears fairly independent of the total volume of oil pumped. So pumping more faster reduces costs and raises profits. Thus a good question might be whether we are witnessing a change in the total global volume of oil produced onshore versus offshore. As I review the Wiki page there does not appear to be data indicating whether a particular project is onshore or offshore (and if offshore whether in shallow or deep water). This doesn't mean that a shift to offshore production is the explanation, simply one that I believe might be useful to explore to try to explain the apparent increase in declines.

If we can verify that decline appears to be accelerating and if we choose to explore the onshore versus offshore aspect, key questions to ask would include:
1. Is the percentage of offshore versus onshore production changing significantly?
2. What is the shape and lifespan of onshore versus offshore production curves?
3. If the answer to #1 is yes and the answer to #2 is such that the curves are steeper and/or shorter in duration, then we might be able to determine whether any acceleration in decline was a temporary occurrence due to the shift in types of field or whether it appeared permanent and independent of the type of field (onshore versus offshore).

Remember that it is possible that a short acceleration in annual declines is simply a mark of a shift in field types going from onshore to offshore. Thus an accelerating decline rate is not necessarily indicative of a problem unless the new offshore oil being discovered starts to fall significantly or if the decline rate continues to accelerate after the shift in field types is complete. That's what we would need to determine - is the acceleration an ongoing thing or just a temporary, transitional phenomenom; and is there enough new production going forward to continue to at least cover for the increased decline rates?

I have been reading the oil drum for more than a year now and never found a reason to post. I want to get more involved somehow. So I guess posting is the first step.

Stuart,
This work is some the most enlightening and interesting work done on the oil drum today. I want to say keep up the good work. Seeing knowledge created out of chaos is absolutely fascinating. This information should be much more transparent and readily available so we can truly plan for the future.
Thanks for all you do.

Phil Jonat

Unfortunately, I only qualify on the third category of your "appeal."

But I'm willing to team up with any 1st and 2nd category TODers on this project.

Any takers?

When looking at additional production we need two major factors.

First we need to include price: This "high price inviroment" as they call it, that has made a lot of projects doable will give you the impression that there is lots of oil around the corner or soon to come on stream. This will surely be limited as the number of rigs is limited, some projects still haven't got the rigs to make them happen.
I cant help to wonder how the "new capacity" can increase with constant rigcount and an established trend toward smaller new fields.

Second, but surely worse, we need to look at psychology among oilproducers. After all they are only humans...
My biggest fear is not the geological limits to oilproduction but the limited incentive to produce once it is established that we are past peak.
We dont even need to be past peak for this scenario to happen, we just need to be confirmed past "peak cheap oil"
Once the oilproducers realize that oil will be much more expensive a year later they will only produce what they need. Suddenly they will use an entirely different model to maximize the value of a reserve.
By producing at a lower rate they will suddenly increase the URR of the field measured in barrels, but also the net present value of a reserve will be higher if produced slower.

If you know for certain that oil will be 10% more expensive next year, then why would you ever pump the oil, sell it and buy bonds that only yield 5%

The countries that need the revenue will probably keep producing if they can't lend the money they need, but countries with savings to use or countries currently saving, will surely keep the oil rather than any kind of money/bonds/stocks they could trade it for.

Just ask yourself if you would sell your oil if you didn't REALLY need the money.
If I was sitting on a few billion barrels of oil in an established post peak invironment I would do anything possible to spend my savings and even take a loan before selling my oil.

Imagine what kind of drop this would give to production!!!

If you dare you might even consider what this would do to the USD as this is the most used currency for savings among oilproducers...

I would much rather hold NOK than USD! Maybe even DKK.
I wonder if the DKK will keep its peg to EUR?
Denmark is after all a net energy exporter with net savings.
Actually I believe Denmark won't be the worst place to be as we have lots of knowhow in the areas of energyefficiency and companies like Vestas, Rockwool, Novozymes and Danisco.

If you think the USD is currently under pressure you haven't seen the beginning. Soon nobody wants the USD, and if KSA starts spending their savings China will surely follow.

It is not the first few percentages of missing oil that will make this ugly. It is the following change of mindset!

Rune

The November issue of the IEA report (P24) states that Non-OPEC supply growth for 2008 is expected to be 1.073 mb/d. The Non-OPEC growth shown in Figure 5 above (Opec, Non-OPEC growth) shows a gross growth of about 4.3 mb/d for 2008. Assuming that the IEA has a good data base and a good handle on schedules, to make the figures balance, we need either a 6.4% decline rate in the Non-OPEC countries (assuming 50 mb/d of production) or that a number of the 2008 projects will be delayed into 2009.

The IEA Medium term oil market report published in July 2007 gives the following projections for Non-OPEC production
2008 51.0 mb/d
2009 51.6
2010 51.9
2011 52.2
2012 52.6

Note that the Nov 2007 issue has updated the 2008 number to 51.2 mb/d. Based on the original data, the IEA is only projecting a total net growth of 1.6 mb/d between 2008 and 2012.

IEA states the following:
"We revise downwards the non-OPEC forecast by 0.8 mb/d in 2011, partly reflecting slippage, but also incorporating a new 0.4 mb/d contingency factor, reflecting a tendency for unscheduled field outages. Supply-side uncertainty is further exacerbated by increasing instances of resource nationalism and geopolitical risk, constraining the ability of the industry to produce the 3.0 mb/d of new production needed each year to offset the effects of decline. Overall, this leads to average non-OPEC supply growth of 1.0% between 2007 and 2012, 0.4% below the growth seen in the previous seven years and roughly half the rate of demand growth projections."

Since the IEA is indicating that the decline rate in the Non-OPEC countries is about 3.0 mb/d, (6%), this is consistent with what is needed to get a net growth of about 1.1 mb/d in 2008 from the mega projects listed above.

Isn't it a bit arbitary to plonk the full capacity of these projects coming o line within a calendar year? Would the model
be more accurate if you added a date on-line and a ramp up factor (Intuitively I would think larger projects would ramp up slower). Also I get the feeling you could then model resource constraints to the increases (how fast can they built the suckers). Looking at the graphs I'll be surprised if 2008 is the bumper year that they predict.

Neven MacEwan B.E.

hi Stuart

since they're in my neck of the woods, i'll try and look through woodside and santos annual reports for the last few years. that might be two off your list..

cheers
phil.

Dear Stuart,

This is a brilliant, as well as huge effort. Thanks and congratulations to you and everyone else who contributes to the Wiki. But please remember my tag line when trying to come to conclusions about production capacity changes.

'Production equals consumption plus or minus changes in stroage. Production does not equal production capacity.'